Madagascar
Poverty Reduction Strategy Paper

This report summarizes the improved Intermediate Poverty Reduction Strategy Paper (PRSP) of Madagascar, and the new policy orientation of the government. This strategy is based on an objective analysis and precise criteria. It presents the general framework of intervention of the PRSP and an analysis of poverty. It defines the strategies of the fight against poverty, and provides overall objectives and actions to be implemented. It reviews the cost and the financing of the programs and also describes the monitoring and evaluation methods of the poverty reduction strategy.

Abstract

This report summarizes the improved Intermediate Poverty Reduction Strategy Paper (PRSP) of Madagascar, and the new policy orientation of the government. This strategy is based on an objective analysis and precise criteria. It presents the general framework of intervention of the PRSP and an analysis of poverty. It defines the strategies of the fight against poverty, and provides overall objectives and actions to be implemented. It reviews the cost and the financing of the programs and also describes the monitoring and evaluation methods of the poverty reduction strategy.

1 GENERAL INTRODUCTION

The first poverty reduction programs were implemented in the late 1980s with a view to alleviating the negative effects of structural adjustment, within the framework of adjustment programs with social dimensions. A few measures oriented towards the poor were undertaken in this respect through social funds, safety nets and specific programs. Such programs were not supported by a truly comprehensive strategy of poverty reduction, and consequently the impacts as well as the results were rather limited: the poverty rate rose from 47 percent to 70 percent during the period 1980-93.

Attempts at pursuing a National Poverty Reduction Strategy were carried out during the 1990s. They failed for lack of significant political resolve as to their appropriation. The “restructuring of the economy” aspect received much more consideration. That is also true for the PNARS or the National Plan for Social Recovery adopted in 1994, and later on the National Action Plan for Social Development proposed at the Copenhagen World Summit on Social Development, which were too much centered on sectoral aspects.

In early 2000, the government decided to draft the PRSP or Poverty Reduction Strategy Paper. The finalization of the interim Paper enabled Madagascar to benefit from the first tranche of financing from the HIPC initiative.

The present government firmly undertook to implement rapid and sustainable development. To that effect, the priority of all priorities will be good governance, the development of infrastructures, health, education and support to the private sector. A plan for economic recovery covering the period from 2002 to 2005 was established in the course of the years 2001-2002.

The intermediate PRSP has been improved upon in order to take into account the major government orientations, and to reflect in operational terms the government’s political willingness to carry through the recovery plan, and by so doing cut the poverty rate by half in ten years. The strategy is ambitious but realistic: it gives priority to the “public-private partnership” principle, relies on objective analysis and accurate criteria, and will be updated every year. It is a national strategy in that it is the fruit of consultation involving all the segments of Malagasy society. It hews to the objectives of international agreements to which Madagascar has subscribed: Millennium Declaration, NEPAD, World Summit on sustainable development, etc.

The stakes underlying the decision to complete the PRSP are considerable since the document itself reflects a political choice and resolve which will engage the responsibility of the public authorities in the medium term vis-à-vis the urgent expectations of the Malagasy population, notably the poor. This is in no sense a makeshift choice imposed by the current circumstances.

1.1 VISION AND AMBITION

Poverty could be described as a state of enslavement and helplessness in which a person is partially or totally deprived of sustainable means of existence, and finds himself excluded from enjoying the fruits of growth. It results in such a person feeling alienation which makes him feel like “a stranger” to the development process1.

Malagasy people, deeply impregnated with ancestral spiritual and religious values—“ny fanahy no mahaolona”2—have a tendency, when experiencing poverty, to deviate from the way expressed by these values, and to adopt “deviant” behavior in order to survive, or resort to makeshift solutions that belong to no overall framework.

Malagasy people, especially the poor, have the impression nowadays that they are losing part of their souls—“very fanahy mbola velona”3 as all the values attached to their authenticity as Malagasies respecting fihavanana—solidarity, mutual aid, humility, and dialogue—have vanished as though by magic. They then adopt a drifting life illustrated by the Malagasy saying, Fiainana kodia very tsihy”4.

The rebirth of a society that recovers its soul constitutes the main desire of the majority of Malagasies, who see in it a framework for their reinsertion into the development process. Restoring fahamarinana and fahamasinana has become the leitmotiv of a whole people.

Each of these two notions carries a whole spectrum of meanings, ranging, in the case of fahamarinana, from accounting accurateness to rectitude, to moral integrity, to psycho-cultural authenticity; as for fahamasinana, it includes notions ranging from personal identity and individual temperament to the capacity for reserve and self-discipline.

The availability of sustainable means of existence for the benefit of the whole of the population and its various components—social, economic and geographical—and if possible the opportunity for these components to enjoy the fruits of growth according to their needs and/or aspirations, constitute the other two types of ambition which motivate the vast majority of the people of Madagascar.

In other words, the national ambition thus defined can be expressed in the following way: “Enable the majority of the Malagasy population as a whole to (i) live in serenity; (ii) produce normally and efficiently; and (iii) meet honestly its basic needs and protect those of future generations”.

Vision and ambition constitute the backdrop of the strategy for reducing poverty.

1.2 THE PARTICIPATORY PROCESS

The Poverty Reduction Strategy Paper defines the policies as well as the ways and means for their implementation. These policies and ways and means are in conformity with Madagascar’s vision, aspirations and orientations, and must harmonize with its institutional instruments and technical means. All this in order to reach positive, palpable results as regards poverty reduction. The document is the fruit of collective study according to a participatory process during which all streams of national, regional, and local opinion, whether of the public sector, private sector or civil society, had the opportunity to express their views. Furthermore, they have been able to confront their respective interests, and together have come up with coherent policies and paths of action concerning poverty reduction.

The following chart shows the main relations between aspects mentioned above:

1.2.1 In designing and drafting

The drafting of the PRSP passed through several major steps that may be summed up as follows:

  • i) At the beginning of the year 2000, the government set up a Technical Cell composed of high- ranking civil servants, academics, local councilors and entrepreneurs from the private sector7. The Cell’s task was to:

    • - Assist sectoral officers of ministries in the preparation of the basic working documents necessary for the groups’ thematic inquiries;

    • - Participate in organizing and coordinating the participatory processes;

    • - Ensure the synthesis of the results of the groups’ thematic inquiries and report to the Prime Minister;

    • - Participate in the dynamic analysis of every aspect of poverty.

    Permanent staff are in charge of the secretariat of the Technical Cell, together with the Adjustment Technical Secretariat (STA).

  • ii) Six technical commissions, set up within the framework of the PRSP, worked actively with the secretariat of the Technical Cell during the finalization of the paper, with the participation of technical ministries, the representatives of the private sector, civil society and the bilateral and multilateral development partners.

  • iii) After the change in administration in 2002, following the crisis which occurred in the country, the Technical Cell was linked up to the Ministry of the Economy, Finance and Budget.

  • iv) The workshop on the strengthening of the participatory process for the drafting of the poverty reduction strategy was organized on September 7 and 8, 2000 in Antananarivo. The first interim draft Poverty Reduction Strategy Paper (PRSP-I) drawn up on the basis of the recommendations of the workshop and previous consultations, round tables and workshops related to sectoral strategies, was discussed during the second workshop in Antananarivo on November 10, 2000, with even greater participation than in September on the part of civil society and the provinces (more than 60 percent compared to 40 percent of the participants in September).

  • v) Subsequently, thematic workshops were organized between February 2001 and August 2001 in order to analyze in depth some of the major themes in poverty reduction, and discuss the outlines of the strategy with the population, namely:

    • - “Rural Development and poverty” theme held in Mahajanga;

    • - “Inequality between men and women” theme held in Toamasina;

    • - “Poverty and AIDS” held in Antsiranana;

    • - “The Effects of bush fires and the practice of forest slash-and-burn (“tavy”) on poverty” theme held in Fianarantsoa;

    • - “Governance and poverty reduction” theme held in Toliary;

    • - “Urban poverty” theme held in Antsirabe;

    • - “Health” theme held in Antananarivo; and

    • - “Education” theme held in Antananarivo.

  • vi) The complete draft PRSP was then presented and discussed in regional workshops held in the six provincial capitals (with an average participation of 120 people per workshop). At this stage the object was to gather the different opinions of the Malagasy population in the provinces, mainly the points of view of the poor, either directly or through organizations capable of expressing their feelings, needs, expectations and suggestions, which were the conditions for their present and future approval of the fight against poverty, before being the subject of debates in a national workshop in Antananarivo on November 15 and 16, 2001; at that workshop, more than 500 participants examined in detail the draft document and the synthesis of the recommendations from the regional workshops.

  • vii) The reinforcement of the participatory process continued with the resumption of the finalization of the document after the suspension of the process due to the events of the first half of 2002, with the organization of two other thematic workshops on environment and good governance during November 2002. The national consultation workshop took place on March 25-26, 2003.

Analysis of the representative character of the various entities that have participated in the workshops organized since the year 2001 up to the finalization of the document, revealed that the administration—councilors included—represented on average 34.8 percent of the participants, the private sector, civil society and the various organizations, 45.8 percent, international institutions 10 percent, and the other components of the population, 6.6 percent of the participants.

The complete draft PRSP, the fruit of these various consultations and the activities of the six technical commissions, was drawn up in order to be submitted to the foreign partners of Madagascar who wish to assist in the implementation of the strategy for poverty reduction.

1.2.2 In monitoring

The same participatory approach will be used for monitoring and evaluating the implementation of the action plans within the framework of a process which will include contributions to the collection of data, as well as the analyses and inquiries within the framework of specific seminars. At the same time the population’s active participation will be requested and guaranteed within the scope of studies on the sectoral strategies and programs, such as the Rural Development Action Plan (PADR), the Urban Poverty Reduction Program (PULP), the Sectoral Transportation Program (PST), the National Support Program for the Private Sector (PNSP), the National Population Policy for Economic and Social Development (PNPDES), the National Population Program (PNP), the National Policy for the Promotion of Women, the Environmental Program, the AIDS Control Program, etc.

1.2.3 For wide dissemination

For the dissemination of the Poverty Reduction Strategy Paper, a website project has been undertaken with the help of technical and financial partners. The site will enable the public and any of Madagascar’s development partners to have access to the results of the workshops organized in conjunction with the reinforcement of the participatory process and the studies undertaken regarding the dynamics of poverty in Madagascar. In addition, it will include information on the donors’ actions in Madagascar related to the program of poverty reduction.

1.3 STRUCTURE OF THE PAPER

The PRSP is structured as follows:

  • - General context of the PRSP and analysis of poverty;

  • - Objectives and strategic lines of intervention;

  • - Poverty risks;

  • - Scope of actions and scenarios;

  • - Programs implementing the strategy;

  • - Cost and financing of the programs for implementing the strategy;

  • - System for the monitoring-evaluating the implementation of the strategy.

2 GENERAL CONTEXT AND SITUATION OF POVERTY

Two types of factors, one linked to the general context of the Malagasy economy, one linked to the problems as well as the actual characteristics of poverty, define the general intervention framework of the strategy for reducing poverty.

2.1 GENERAL CONTEXT

a few indicative data

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2.1.1 General situation of poverty

Despite a very high rate of 69 percent in 2001, the poverty situation in Madagascar improved a little between 1993 and 2001. The improvement could be seen especially in urban areas. However, it was not true for each region, because in some regions it improved while in other regions it deteriorated. Moreover, rural areas continued to become increasingly poor. Consequently, it can be said that the recorded economic growth—and therefore the economic policy during the period—hardly benefited the poor in rural areas.6

The present state of income levels in Madagascar is the result of a long process characterized by (i) weak economic growth caused by an insufficient level of investment (less than 15 percent of GDP), and (ii) a rather high birth-death ratio (around 2.8 percent).

Such performances are caused principally by insufficiencies:

  • - In economic and social development policies: (i) the diagnosis of the country’s technical and socio-cultural characteristics in all their dimensions; (ii) the definition of a coherent set of overall and sectoral objectives and the strategies for implementation; and (iii) giving concrete expression to these objectives in terms of projects/programs, appropriate measures and actions in the long run and their implementation, monitoring and evaluation. Such insufficiencies resulted in imbalances affecting resources and the use of goods and services, distributed incomes and effective expenditures, financing needs and means of financing.

  • - On the organizational level, intervention agencies, the decision-making process, programming and management tools, and the optimum utilization of funds;

  • - Support measures aimed at enlarging the productive bases for development in the rural environment: agricultural yields remain low in spite of actions undertaken in terms of supervision and extension work. To all this should be added land ownership insecurity, difficult access to the means of production and credit, problems related to physical accessibility.

  • - The involvement of the civil society in the decision-making process and implementation of development programs and actions; and involvement of rural people in the process of identification, decision making and implementation of the projects that might improve their means of production.

As stable elements in the process of social mobilization, traditions and cultures may facilitate organization in social life, both in productive activities and in the security field. In many instances, however, this is not true.

2.1.2 On the economic level

  • Economic growth

Prior to the 1980s, the Malagasy economy grew too modestly in relation to population growth to allow actual improvement in the living conditions of the people. The implementation of a stabilization and structural adjustment program at the beginning of the 1980s (deregulation of the exchange rate, liberalization of domestic trade, deregulation of prices, withdrawal of the state from production and trade activities, liberalization of imports, etc.) enabled positive economic growth in real terms to be achieved at the end of the decade, even though annual inflation remained at a rather high average level of 16 percent. This program was supported by the donor community.

This improving economic situation was disrupted by the events of 1991. The upheaval which ensued resulted in the suspension of international economic agreements. The average per capita growth rate fell to a negative 2.7 percent between 1991 and 1996. Per capita GDP reached its lowest level in 1996 (US$198 in constant 1997 dollars), that is 60 percent of its level in 1971 (US$338 in constant 1987 dollars). Inflation was more than 50 percent.

The period 1997-2001 was marked by a measure of stability and the promise of an economic recovery with minimal social impacts. The measures taken included: (i) reduction of customs barriers; (ii) elimination of tax exemptions; (iii) implementation of numerous budget restrictions and budget expenditures controls; (iv) privatization; (v) elimination of quasi-budget activities of the Central Bank, etc. These measures enabled restoration of the major economic balances in public finance, as well as in external trade and the currency, to be re-established. The inflation rate decreased from 14 percent in 1999 to 8 percent in 2001, and the interest rate from 17 percent to 12 percent; the exchange rates stabilized. Foreign direct investment rose from US$10 million in 1996 to US$120 million in 2001. The private investment rate reached 7 percent of GDP in 2001 compared to 4 percent in 1997. The average growth rate of the economy was 4.5 percent.

Of the 4.5 percent of economic growth in the years 1999 and 2000, about 1.5 and 0.8 points were due to “secondary activities” of exports and trade, respectively. Tourism, construction/building and public works activities accounted for 0.6 and 0.4 points, respectively. As for the primary sector, the good performance of fishing (0.9 percent) should be noted. On the other hand, it appears paradoxical that agriculture, which provides the great majority of Malagasies with their livelihood, should pull the country’s economic growth rate down. Regarding industries (EPZs excluded), they contributed for about 0.4 point. It is the secondary activities of these sectors which will be examined successively below:

Concerning the agricultural sector, nearly 70 percent of the country’s production was dominated by rice growing. Yet rice production has increased by only 1.2 percent per year since the 1980s, and its yield has never reached the threshold of 2.1 tons per hectare. Rice growing techniques still remain to a large extent quite traditional, and the use of inputs is not very developed. The share of agriculture in GDP and the primary sector has undergone a downward trend for several decades. In real terms, the weight of agriculture in GDP was 17.5 percent (48.5 percent of the primary sector) in 1990, compared to 15.3 percent (44.5 percent of the primary sector) in 2001. This situation was due to the combination of two factors: a low growth rate for agriculture (2 percent of the average annual growth from 1997 to 2000, at constant prices), compared to much more sustained growth of the other sectors such as forestry (9.8 percent on average).

A big difference has been observed between the retail prices for rice and the producer prices. This difference can be explained by the absence of fluidity in the movement of goods (from production sites to the markets) owing to the deficiency in road infrastructures and the non-mastery by the farmers of storage resources and techniques. Such an environment tends to be profitable for downstream operators (storage and other activities), and maintains a situation marked by sporadic income and speculation in the rice growing sector. Since the beginning of the 1970s, the national rice supply (with an average yearly growth of 1.4 percent for the production of paddy) has not always been sufficient to cover the yearly consumption needs of the country, i.e. about 1,650,000 tons.

Regarding the weight of the Export Processing Zones (EPZs) in the Malagasy economy, their direct contribution to the formation of GDP is slight and hardly reaches 1 percent, whereas it is 11.2 percent for the other industries in Madagascar: 10.6 percent for trade and 9.9 percent for transportation of merchandise. The importance of the EPZs lies in their ability to generate jobs and stimulate the activities of other economic sectors in the country (transportation of merchandise, transit, telecommunications, commerce, indirect taxes), creating jobs indirectly at the same time. Therefore, they are part of the enterprises which have a high capacity for employment, since starting from less than 20,000 direct jobs created in 1994, there were 75,000 direct jobs created in 2000, and about 100,000 in 2001, to which 25,000 indirect jobs should be added. According to IMF data, nearly 80 percent of foreign investments in Madagascar go to the EPZs. Of this total, 38 percent come from France, 25 percent from Mauritius and 9 percent from other European countries.

To sum up, the period gave rise to prospects of economic recovery. Such prospects were again jeopardized by the post-election crisis of 2001. The crisis highlighted the fact that the good economic performances, against the backdrop of an apparent political stability, were in reality hiding a creeping, deep discontent and tension since they depended on the poverty of the great majority of Malagasies.

  • Situation of the debt

Madagascar’s indebtedness problems remain entire. In 1995, debt-servicing represented nearly 152 percent of tax receipts, and 52 percent of export receipts. The absence of any rescheduling agreements between 1991 and 1996 aggravated the situation, causing a significant accumulation of outstanding external payments. The rescheduling agreements of 1997 (Paris Club VIII), 2000 (Extension of Paris Club VIII) and March 2001 (Paris Club IX) enabled a reduction in the net updated value of the debt.

At end-2002, the nominal outstanding external debt stood at US$4,587 million, that is 100.6 percent of GDP. In net present value, after the usual adjustments, the debt stands at US$2,277 million, or the equivalent of 49.9 percent of GDP, 211.3 percent of exports of non factor goods and services, and 624.7 percent of tax receipts. Taking into consideration interim assistance under IPPTE, the net present value of the debt stock stands at US$1,397, and represents 30.6 percent of GDP, 129.7 percent of receipts from non factor exports of goods and services, and 383.3 percent of tax revenues.

Table 1.

Madagascar: Situation of the external debt 2000-2002 and sustainability indicators

(Unit as percentage)

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• Source: Central Bank of Madagascar

External debt-servicing is expected to remain rather substantial, having reached US$128 million in 2002, or 11.9 percent of receipts from exports of nonfactor goods and services, and 35.2 percent of tax receipts. Nevertheless, in the wake of interim assistance, debt-servicing fell to US$50 million, i.e. 4.7 percent of receipts from exports of nonfactor goods and services, and 13.8 percent of tax receipts.

These indicators point to a situation in which Madagascar would be sensitive to a change in parameters such as an unfavorable external shock, which would put the country into an intolerable position by worsening its debt burden. In such circumstances Madagascar’s debt burden would be unbearable, even in the presence of a stable climate, stable political situation and restructured flows. Added shocks would only increase the need for external financing.

  • Problem of accessibility

The problems of impassable roads and physical inaccessibility remain pivotal determining factors in the progress of the Malagasy economy. Because of its rugged relief and the great size of the island, the cost of local movement of goods, production factors and competences is relatively high here compared with other similar countries. Taking account of the geographic situation of the island which leads to high costs, it is time Madagascar “moved nearer” to the rest of the world in order to ensure development. To a large extent, the policies to be carried out consist in reducing distances inside the island as well as between the island and the rest of the world. The country’s economic development depends very largely on the reduction of these costs. As a general rule, 33 percent of the communes which do not have access to a national road and 30 percent which have no access to a provincial road consider transportation as their priority of priorities7.

  • Factor of production

Endowments in land and equipment are small and unequally allotted among farmers’ households and notably the poorest of them. Access to land is becoming more and more difficult in the wake of the rapid population growth of the last few years, combined with the vagueness of real property law and the inadequacy of the agencies responsible for land tenure. A tendency toward more intensive exploitation of non-irrigated plots of land such as hills and forests is growing. Therefore, questions related to pressure on plots of land, with the impact that the latter has on the ecology and poverty, become crucial in that they have strong negative effects on the productive resources of rural households.

  • Regional development

On the regional level, despite a certain homogeneity of the Malagasy population, some discrepancies from the point of view of development exist between regions. A more balanced development of the regions therefore remains a leitmotiv of the country’s overall policy. An appropriate balance must always be maintained between regional and national interests.

  • Ecosystem and climatic changes

Madagascar possesses an economic potential which derives from the diversity and quality of its manpower on the one hand, and its ecological and environmental heritage on the other. Such assets are being threatened, however, as the Malagasy ecosystem is undergoing a disturbing deterioration, and the prevalence of communicable or endemic diseases risks jeopardizing the health of its manpower.

The impacts of “climate changes” are particularly serious and might cause considerable damage to the ecosystems of the country’s natural environment as well as to human beings. Agricultural activities are becoming vulnerable because the increase in the sea level causes erosion of the coasts and floods, the invasion of estuaries by salt water and the deterioration of salt marshes and coral reefs as well as the lowering of the volumes of fresh water tables.

2.1.3 On the political and institutional level

As a consequence of the pacifying actions which followed the political events of 2001-2002 after the presidential election, a return to political stability can be felt. The effective implementation of the Parliament (Senate and National Assembly) is one sign of accomplishment. This stability will be consolidated by communal elections scheduled in the course of the year 2003.

Within the framework of streamlining the administration’s actions and in order to improve its efficiency, the government clarified the missions of the various ministerial departments, 22 in number, and has divided them into three major categories of function: sovereignty, development, society.

2.1.4 The post-crisis situation

The political crisis of the first six months of 2002 engendered economic and social disorganization, characterized by a decline in growth on the order of negative 12 percent, and brought about the aggravation of the vulnerability of regions, economic agents, population strata (vulnerable groups, including women, children, senior citizens, the disabled, the homeless, etc.). Besides, the effects of the various shocks have brought about the emergence of a new category of poor people in urban areas (e.g. employees in Export Processing Zones) and all sorts of deficiencies, notably in terms of food, income, employment, infrastructures, stability/serenity/security and credibility.

The secondary sector has been affected the most, with a decline of 25 percent, followed by the tertiary sector, with a negative 12.5 percent. Agricultural production recorded a negative growth rate of 1.4 percent.

To meet this situation, the government established a recovery and reconstruction plan. Through the commitment of Friends of Madagascar at the Paris conference of July 2002, an assistance package totaling US$2,477 million is available over a period of 4 years. One part of this amount, on the order of US$219.5 million, is principally earmarked for the priority emergency program (2002 to July 2003). The latter began to be implemented by the government and the Emergency Credit for Economic Recovery (CURE) granted by IDA (US$50 million) towards the last quarter of 2002.

The measures taken within the framework of the priority emergency program proved to be relevant and had immediate impacts on the sectors of education, health and security, notably in the rural context. The cancellation of school fees led to an improvement in the school attendance rate (more than 11 percent in the primary schools compared with the year 2000-2001). Services in health care have become more accessible thanks to the cost recovery suppression policy. The newly adopted policy for reducing insecurity (increase in the number of interventions together with an increased number of full time field personnel) engendered a stronger feeling of security among the rural population. Consequently, security is no longer regarded as the main development priority for most of the rural communes. Nevertheless, a certain distrust vis-à-vis the legal system still exists. The measures taken also permitted the Inter-bank Currency Market (MID) to open, and the resumption of the BTA system or Treasury Bonds by Auction, which was temporarily suspended during the crisis period.

However, the negative effects of the crisis are still perceptible. The tiding-over period in the rural areas seems to be difficult compared with the previous years. The people believe that their average income has decreased by 20 percent, the poor having suffered more than the rich and the middle-income strata. The level of success in the CEPE fell substantially: 19 points for rural public primary schools, and 31 points for urban public primary schools. The increase in enrollments for schools has incidentally aggravated the problems of insufficiency and/or allotment of teachers and school rooms.

Prices reached staggering heights in the depths of the crisis, but have stabilized since, and have assumed a downward trend with the normalization of the political situation. On yearly average the inflation rate stands at 15 percent. The MID suspension and the retaining of an official exchange rate during the 6 months of its closure enabled control of the risks of depreciation of the MGF.

During the crisis there was a foreign assets freeze from March until July 2002. The situation led to a drop in the volume of trade transactions, and the level of imports and exports diminished. As a result there was a slight deterioration in the trade balance of negative 4.5 percent in 2002 versus a negative 1.3 percent in 2001. The tax burden recorded a serious decline of about 7 percent of GDB in 2002 after the 9.6 percent in 2001.

principal reforms adopted since the implementation of structural adjustment programs

  • Budgetary reforms:

  • Application of value added taxes (VAT) (1994-2001)

  • Reinforcement of fiscal and customs administrations (1997-201)

  • Reforms of civil service (1998-2001)

  • Strengthening of the budgetary execution follow-up (2001)

  • Financial and monetary sector reforms:

  • Privatization of public banks (1996-1999)

  • Independence of the Central Bank (1994)

  • Privatization of public enterprises:

  • Establishment of legislative bases for privatization (1996)

  • Deregulation of telecommunications: licenses for cellular phone operators (1996)

  • Privatization of the oil company (2000)

  • Privatization of state owned enterprises (1988-2001)

  • Exchange and payment policy:

  • Adoption of a floating exchange rate (1994)

  • Liberalization of current transactions (1996)

  • Commercial policy:

  • Liberalization of production and marketing of coffee, cloves, vanilla and rice (1987-1997)

  • Abolition of price controls (1986)

  • Abolition of export taxes (1988)

  • Elimination of import restrictions and licenses (1988-2001)

  • Regional tariff alleviation (1987-2001)

2.1.5 The Structural adjustment program

The cumulative effect of the structural adjustment programs launched in 1985 was to create an economy that was more open and market oriented. On the whole, the execution of the reforms has been satisfactory. In certain areas, progress has been slow. Problems still exist and new difficulties have emerged. Significant results appeared starting in 1988, with growth rates greater than the birth rate, except for the period 1991-1996, during which the programs were suspended. The average annual growth rate was 3.5 percent over the period 1988-1990, and 4.3 percent for the period 1997-2000.

2.1.6 Sector-based programs

In terms of social development and poverty reduction, the first National Program for the Improvement of Education implemented from 1989 to 1997 (PNAE I), provided the country with instruments for managing the sector. The second program, PNAE II, implemented since 1997, was aimed at consolidating the previous achievements by basing its implementation strategy on a partnership involving the participation of student parents’ associations from each school and local communities, and by linking up the budget items for primary school teachers with the school level.

Regarding the health sector, fresh energy was imparted to the system based on health care districts, which enabled the provision of human resources and equipment that is indispensable for a smooth running of the services; this led to a noticeable impact on the rate of access to health care facilities, thanks to a better articulation of efforts with the other sectoral actions related to health, such as nutrition, drinking water, food security.

Specific programs were also launched to facilitate the promotion of employment and income- generating activities through food security projects, the implementation of basic infrastructures in urban and rural environment (HIL for irrigation canals, rural tracks, etc.), and the promotion of micro- enterprises. Integration of these actions into a coherent and larger whole within the framework of multi-sectoral programs oriented towards poverty reduction, will enable obtaining of significant results at the national level.

Concerning environmental protection the “Malagasy Environment Charter” (Law No. 90-033 of December 21, 1990) sets the general framework of the environmental policy in Madagascar. The National Plan for Environmental Action (PNAE) operationally reflects this policy, whose objective is to reconcile the Malagasy population with its environment with a view to sustainable human development. Several tools have been developed within the scope of the various projects, such as:

  • - Designing support tools for the decision and a reference system: National Forest Ecological Inventory (IEFN), forest development plans, slope management plans, land occupation maps and forest evolution maps. Protected Areas Network Management Plan, reports on the state of the environment, National and Provincial Environmental Key Indicators, Environmental Information System.

  • - Protection and management of the natural biodiversity heritage: national network of protected areas and ecotourism;

  • - Implementation of mini-projects in soil conservation, agro-forestry and other community projects; dissemination of anti-erosion techniques and agro-ecologic techniques, communal development plans;

  • - Community management of natural resources: GELOSE and GCF;

  • - Studies on environmental impacts.

2.1.7 The problems of Governance

Two modes of governance have succeeded each other in Madagascar: governance of the paternalistic type in the middle of the 1970s, and of the democratic type since the beginning of the 1990s. The first, based on the predominance of the public sector and centralized management of resources, led to the stagnation of the economy, causing a decrease in incomes and a widening of the differences between the rich and the poor. Indeed the regime came up against a dysfunction of the administration and the public enterprises owing to malfunction in the supervisory bodies and control mechanisms. The second mode is based on gradual decentralization of public affairs management, and is characterized by (i) new energy imparted to the participatory process; (ii) the deregulation of information as well as political life, in order to promote transparency and accountability; and (iii) the liberalization of markets.

The poor quality of public affairs management as well as the serious erosion of wages paralleled the deterioration of public administrations, demoralization of civil servants and the difficulties facing the services.

1. The deterioration of public administration is characterized by a dearth of resources in the Civil Service, the deterioration of the status of civil servants and the high incidence of unpunished corruption.

As for public affairs management, the main problems are the bad management of public finances concerning the implementation and control of the budget, the absence of transparency concerning the information related to public finances, and the irresponsible behavior of state representatives.

As for the judiciary system, salient features are the lack of independence of judges and the slowness of the judicial administration.

2. The slowness of the decentralization/devolution process can be seen throughout the very centralized institutional structures as reflected in the low rate of expenditure decentralization.

3. The poor organizational capacity of the civil society is clearly seen in the absence of a genuine platform of civil society.

4. The lack of incentives for the development of the private sector due to the slowness of the administrative formalities and the judiciary procedures; the lack of information about sectoral statistics.

reports on the regional consultation workshops devoted to good governance

Consultation workshops have revealed: an excessive use of discretionary measures resulting in a lack of uniformity in the application of the law, regulations and measures; a lack of clearly understandable intentions on the part of the administration; a lack of predictability and stability of regulations; and a legislation that is often redundant and at times contradictory. This discretionary environment is a source of uncertainty for the population and particularly in the world of business, breeding an environment favorable to corruption.

The implementation of regulations governing Export Processing Zones, for example, has reduced costs resulting from governmental bureaucracy and its ponderousness, a source of corruption which entails, along with inefficiency, serious economic costs that are borne ultimately by the poor. The workshops brought out the following essential points which hinder the rapid and sustainable development of the country :

  • - A not very competitive economy but with a high potential;

  • - A barely literate young population, whose schooling is only average, receives little health care and is at risk for diseases;

  • - An inability to formulate strategies and priorities for the investment program;

  • - Low efficiency of public services;

  • - Lack of coordination of governmental actions.

2.1.8 Appraisal of programs, formal and informal mechanisms of social protection

In the course of the last twenty years, documents aimed at limiting the effects of the deterioration of the economic situation and/or social security have been drafted. Examples are: the Economic and Social Development Recovery Plan (PREDES), the National Social Recovery Action Plan (PNARS), the National Poverty Reduction Program (PNLCP) preceded by the drafting of the National Poverty reduction Strategy (SNLCP). However, these documents remained as mere guideline documents and have not been followed up by actual implementations for lack of financing, as succeeding administrations were unable or unwilling to appropriate them.

Programs like the Program of Social Action and Support to Economic Management (PASAGE) continued by the Project of Institutional Support to Public Management (PAIGEP); the Support Program to District Initiatives (PAIQ); and the UNICEF Programs, were designed and implemented in order to help alleviate poverty.

The implementation of these various programs remains limited to well defined geographical zones, and their impacts are for that reason slight. In addition, the approach used within the scope of the activity program planning was not in keeping with an overall long-term vision of the problems nor with the quest for synergy with all the other interventions. Other factors included the small volume of programmed investments, the limited follow-through on the part of execution and maintenance structures in order to ensure the functional quality of the infrastructures implemented. For this reason, they had limited stimulus effects on the economies of the zones concerned.

Although the various programs cover a great deal of the national territory, the interventions fall short of the actual needs. The gap, as evaluated from the point of view of beneficiary populations in relation to the number of people vulnerable to risks, ranges on average between 80 percent and 100 percent, except for programs related to the prevention of cyclones and natural catastrophes (gap of 38 percent) and programs related to malnutrition control in the schools, and mother and child health (gap of 46.4 percent). Programs related to economic insertion and prevention of economic risks and shocks are almost nonexistent. Safety net programs do not provide perennial solutions to the precariousness of the vulnerable populations. It seems that there is a lack of synergy between the various actions carried out in the field owing to the absence of a well defined national strategy for social protection.

Concerning the social protection system constituted by CNAPS, the National Social Welfare Funds, the civil and military pension funds, company medical services, the supply of social credit services, and the public services of social security, an ILO report analyzing the situation notes that at present only 7 percent of the working population benefits from some form of social protection.

As for the informal mechanisms of social security, they may be mechanisms prejudicial to the vulnerable sections, or positive mechanisms in reaction to shocks and risks. Informal credit systems are proliferating. In the rural environment there exist similar systems to which rural people resort in the event of difficulties (tiding-over period, happy and unhappy events).

2.2 ANALYSIS OF POVERTY

2.2.1 Characteristics of poverty

2.2.1.1 The level of poverty, measured by the poverty rate, the intensity of poverty and the human development indicator, remains high

International standards define the poor as individuals whose resources8 are insufficient for consuming, in addition to indispensable non-food elements9, a food ration of 2,133 calories per day, the minimum deemed necessary for maintaining a normal active life.

Applying the above-mentioned definition, the poverty threshold10 for individuals was estimated at MGF 998,600 per year in 2001, which served as the basis for calculating the rate of poverty (or incidence of poverty). This rate determines the percentage of people who live under the poverty line, estimated to be 69.6 percent for Madagascar (in 2001). In order to understand the fate of the poor, the poverty rate is supplemented by the notion of poverty intensity11. It measures the seriousness of the situation of the poor and determines the difference in percentage of the average income of the poor in relation to the poverty threshold. It was evaluated at 34.9 percent in 2001.

uA01fig03

Incidence and intensity of poverty as a percentage

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

The decline in economic performances between 1991 and 1996 had negative repercussions on the situation of poverty, which deteriorated in 1997 compared with 1993 (73.3 percent versus 70.0 percent), and became more intense (34.6 percent versus 31.3 percent). But economic recovery such as that observed since 1997 is reflected by a gradual improvement of the situation, the poverty rate in the year 2000 being estimated at 70.2 percent, a level comparable with that of 1993. Such improvement continued until 2002, eventually becoming a downturn in the incidence of poverty of 69.6 percent; on the other hand, the intensity remained virtually unchanged.

COMMENTS ON THE METHODOLOGY OF POVERTY MEASUREMENT

The method for measuring poverty was improved in 2001. Supplementary elements were added to the evaluation of households’ consumption, notably the evaluation of durable goods and payments in kind. For this reason, the results obtained between 1999 and 2001 are not perfectly comparable. Nevertheless, using the database of 1999 and 2001, it was possible to chart the progress of poverty. In order to get comparable figures and preserve the results obtained in 2001, the measures concerning the previous years comparable to those of 2001 were assessed from the changes between the various years. For example, at the national level in 1993, the incidence of poverty was 70 percent; the corresponding rate comparable with 2001 was 70.4 percent (see table).

Madagascar is still classified among the poorest countries in the world. More than two out of three persons are poor. The Indicator of Human Poverty (IHP)12 makes it possible to situate the progress of Madagascar’s development in relation to other countries. The indicator focuses on three essential aspects taking into account human needs: longevity, education and decent living conditions.

With an IHP of 0.467 in 1999, Madagascar was among the countries whose human poverty is high. However, compared to 1997, the IHP (0.517) has fallen by 9.8 percent, reflecting an improvement in the distribution of human development within the population13.

2.2.1.2. Poverty profile

Poverty in Madagascar as in several African countries is a rural phenomenon and shows significant variations from one region to another as well as according to socioeconomic groups and gender.

uA01fig04

Contribution to poverty of place of residence in 2001

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

2.2.1.2.1 Poverty affects 85 percent of the rural population

More than three-fourths (85 percent) of the poor live in a rural environment. Urban households seem to have a much more decent life than rural households. This difference is reflected in per capita consumption, since in the rural environment consumption is inferior to the poverty threshold and represents 32.5 percent less per capita in comparison with consumption in the capital. The improvement of the situation in 2001 as compared with 1999 principally concerns the urban environment where the incidence rate came down by 2.1 percent, versus a slight diminution (1.8 percent) in the rural environment. As for poverty intensity (graph), it was more salient in 2001 (39.8 percent versus 18.3 percent) and reveals a deterioration of the situation of the poor in the rural environment during the period 1997-2001.

uA01fig05

Trend in poverty intensity according to environment

(in percent)

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

2.2.1.2.2 The spatial distribution of poverty is unequal

The poverty phenomenon undergoes significant variations from one region to another. These variations are evidenced in the following table. In terms of income, poverty is localized in Fianarantsoa and Toamasina with a poverty rate bordering on 80 percent in 2001. The rate is lower in the province of Antananarivo in comparison with the other regions. It is 10 percent more likely that a person living in Fianarantsoa will be poor than when living in Antananarivo. In Toamasina this rate is 13 percent14.

Table 2.

Madagascar: Poverty profile by province

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Source: INSTAT/DSM

The incidence of poverty has not developed in the same way across the six provinces. The province of Antananarivo saw its poverty diminish gradually, with a rate dropping from 63.4 percent in 1993 to 48.3 percent in 2001. The province of Toliara followed the national trend with some deterioration in 1997 and a recovery in 1999, and with continuous improvement until 2001. The province of Toamasina followed the same trend except in 2001, when poverty worsened and returned to its level of 1997. In the other three provinces (Antsiranana, Fianarantsoa and Mahajanga), persistent poverty in the rural environment led to a deterioration of the overall situation up to 1999. Such aggravation of the situation went on until 2001 in Mahajanga, whereas it stopped in Fianarantsoa. Antsiranana experienced a noticeable improvement between 1999 and 2001.

It is important to distinguish the rate of poverty from the contribution to poverty, which is the proportion of the total number of the poor living in the regions. It is worth noticing that the province of Antsiranana, which has a rather high poverty rate (69 percent), has only a small proportion of poor people (7.5 percent). In fact, it is the least populated of the 6 provinces (7.6 percent of the total population live in the region versus 30 percent in Antananarivo).

uA01fig06

Contribution to total poverty

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

2.2.1.2.3 The poor are essentially farmers

In general, the socioeconomic class of the head of the household determines the household’s level of expenditures, and consequently its situation vis-à-vis monetary poverty. The table below confirms that households whose head is engaged in farming or cattle raising as his principal activity are, in the majority of cases, the poorest in the country, in particular small farmers. The highest poverty intensity is also found in this class. Shopkeepers and entrepreneurs as well as managerial personnel, on the other hand, are less affected by poverty.

Table 3.

Madagascar: Distribution of annual per capita expenditures according to the socio-economic group of the head of family in 1999.

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Source: INSTAT/EPM 2001

In the agricultural sector, farmers are the most vulnerable group. Over the period 1993-1999, the percentage of poor people as well as the intensity of poverty in this socio-economic category, which were already high, increased in a significant way.

2.2.1.2.4 impact of gender: female heads of household manage to face up to the situation as men do

About 19 percent of households are headed by women. While in 1993, households headed by women were poorer than those headed by men, in 1999 the situation became almost equal in both cases. The situation leveled out between 1997 and 2001.

Households headed by divorced women or widows are poorer than families headed by married or single women. But single women have more difficulties than married women who are heads of households.

Table 4.

Madagascar: Situation of poverty according to gender and the marital status of the head of the household.

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Source: INSTAT, EPM 1993, 1997, 1999 and 2001
2.2.1.2.5 There is a gap in development to the detriment of women

The gender-specific indicator of human development (ISDH) shown in the table indicates that there is a development gap to the detriment of women. The difference between the IDH and the ISDH measures the size of the disparity between men and women.

Table 5.

Madagascar: Indicators of human development in 1999.

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Source: RNDH 2000

In rural environments, this gap is striking, with a low level of the ISDH (0.354) compared to urban environments, where it is 0.596. At the regional level, the sociological disparity between men and women respecting human development can be observed in all the autonomous provinces, with a more marked disparity for the provinces of Fianarantsoa (ISDH of 0.333), Toliara (0.360) and Mahajanga (0.362).

In education, illiteracy is higher among women (50.6 percent). The female school attendance rate is 70.2 percent versus 73.8 percent for men. The girls’ graduation rate (from primary to secondary school) is often inferior to that of the boys.

Women have more difficulties obtaining loans and financial services because of the lack or insufficiency of collateral related to their slim financial base and low level of education.

There are inequalities in employment: there is a high proportion of women in the informal sector and in the low-rank socio-professional categories and in less qualified jobs.

The structure of women’s income is very fragile, with 12 percent of it from non-stable resources (transfers).

Concerning family planning, there is a related gender problem in that women do not have sufficient freedom in the choice of the methods used for birth control.

2.2.2 Determining factors of poverty

Poverty is characterized by an unacceptable deprivation (psychological, social, physical, etc.) of social well-being. It can be defined as a non-appropriation or a non-mastering of living means (lack of assets) as well as a non-enjoyment of the fruits of growth in order to acquire the basic essential goods (inequality).

2.2.2.1 The main assets

The assets at the disposal of households are deemed to have an influence on their well- being. They act as insurance guaranteeing their survival. The study of the determining factors of poverty15 shows that land contributes most directly to the satisfaction of family needs, especially in rural areas. Manpower is also a powerful generator of consumer power, both in rural and urban areas.

2.2.2.1.1 Access to land in rural area

The distribution of land is unequal.

Land plays a primordial role in agricultural activities because 73.2 percent of Malagasy households are farmers.

In rural areas, the richest families own plots of land three times larger (0.57 ha) than the poorest families (0.19 ha). The phenomenon is more salient for agricultural rural families, with a ratio of 1 to 3.7. The graph below gives an illustration of this unequal distribution of cultivated land. The evolution of the curves shows a deterioration in the distribution of land which became more and more unequal between 1984 and 2001.

uA01fig07

Distribution of total cultivated lands in rural areas, 1984,1994 and 2001

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Source: Recensement National Agricole (RNA 1984) and EPM 1994 and 2001.
2.2.2.1.2 Access to land is difficult

From 1993 to 1999, the average per capita land area diminished slightly at the national level and especially in agricultural rural areas. This downward trend can be seen in all categories of households. The contrast between small parcels of farmland and large surface areas of uncultivated land shows that there are obstacles to access to land.

These obstacles are due to the lack of precision of land law and the structure of land administration. They take many forms: (i) on the social level, land occupation is governed by complex customary regulations; (ii) on the administrative level, the legal acquisition of land is subject to a long and expensive administrative process; and (iii) on the cultural level, Malagasy people have a deep-seated attachment to land, which is reflected in a tenacious retention of land.

The less land households have, the more acute their poverty is. In 1999, more than 85 percent of families who had less than 0.2 ha per head were poor, with a high poverty intensity. Poverty is more serious for agricultural rural families, affecting more than 91 percent of the individuals with an even higher intensity (51 percent).

Table 6.

Madagascar: Situation of poverty according to the average land surface owned

(Average per capita surface area in hectares of the parcels owned)

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Source: INSTAT, EPM 1993 and 1999
2.2.2.1.3 Manpower

Employment and poverty are closely linked as it is by his work that a man ensures his existence and that of his family. He therefore receives the bulk of his resources from his work.

2.2.2.1.4 The employment rate is relatively high but inadequate skills and underemployment are evident

The employment rate is 65.5 percent in Madagascar: 56 percent in urban environments and 70 percent in rural environments. Men work more than women (the insertion of women into the labor market is 62 percent versus 68 percent for men), but active women are relatively older than men (31 years versus 32.2 years). According to the Permanent Household Survey of 2001, unemployment is fairly low; it affects only 3.6 percent of the active population. It rather concerns urban environments, in which the estimated unemployment rate is over 12 percent. Madagascar does not lack plentiful manpower: problems arise in terms of lack of skills and underemployment related to limited working hours, which stands at 22 percent.

2.2.2.1.5 The poor work in agriculture

About 90 percent of the poor work in agriculture. Better off individuals work in trade, administration or transportation. It has been demonstrated that to be employed in the agricultural sector in comparison with being a manufacturer substantially increases the probability of being poor (15 percent). This result is verified irrespective of the fact that the household is in a rural or an urban environment16.

2.2.2.1.6 The rate of child employment in poor families is high

Children’s work is most frequent among the poor. More than 11 percent of the active population are under 15, and this proportion diminishes as living standards increase. Among the richer families it is estimated at 3 percent. The phenomenon is more marked in the provinces of Mahajanga (17 percent) and Toliara (21 percent).

2.2.2.1.7 Income is relatively low

A salaried employee earns MGF 294,000 per month17 on average. This amount is lower in rural areas. Rural employees earn half of what those in the capital earn. A large disparity exists therefore between employees differently situated.

Manpower costs are relatively low in Madagascar. Converted into dollars, the average yearly personnel expenses per employed person are about five times lower than in Cameroon and eight to nine times lower than in Ivory Coast18. The average monthly wage in the garment industry is about US$60, versus US$70 in India and US$225 in South Africa.

Moreover, the income of the majority of Malagasies hardly covers their essential expenses. Consumption expenses are dominated by food (70 percent), which leaves little possibility for meeting the other needs thought to be indispensable (health, education, housing, etc.).

2.2.2.1.8 Income is unequally distributed

Poverty and inequality are two different notions but they are closely linked. Inequality gives an idea of how incomes are distributed and serves as basic information to account for poverty.

The Lorentz curve (see graph below) shows a slight increase in inequality in 2001. More than half of the population mobilized only a quarter of income in 1999 and only 22.5 percent in 2001. The increase in inequalities confirms the fact that growth between 1999 and 2001 was beneficial mainly to better off people (individuals above the poverty threshold).

uA01fig08

Graph: Curve of concentration of per capita expenditures for the years 1999 and 2001

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Source: INSTAT/DSM/EPM 2001
2.2.2.2 Factors impeding an increase in productivity

These are factors that thwart the growth of the productivity of assets (land, manpower). However, properly employed, these factors may foster the betterment of the living standards of households.

A study conducted by INSTAT and Cornell University in the communes enables us to classify the priorities of the population. Each focus group was given the choice of classifying by order of importance the government’s interventions, namely health, education, security, transportation, agriculture, environment, and water. The results are presented in the form of averages by commune.

First of all, agriculture, transportation and security come in first place, with 27 percent, 26 percent and 15 percent, respectively, of the respondents. Then come the social sectors with 14 percent, 10 percent and 6 percent respectively for health, education and water.

Table 7.

Madagascar: Priorities for development according to commune focus groups

(September-November 2001)

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Source: Census of communes, Cornell University, 2001
2.2.2.2.1 Lack of dynamism in agriculture due to agricultural policy and institutional constraints

A large part of Madagascar’s agricultural potential has remained unexploited until now. This is due to the agricultural policy and institutional constraints.

Agricultural policy

Since the mid-1970s, the policies undertaken in the agricultural sector have not produced satisfactory results. They led to systematic nationalization, high duties, a chronic overvaluation of the exchange rate, generalized price and marketing circuit controls—especially regarding export crops. The latter kept real producer prices down to the point of discouraging production. The growth rate of agricultural production did not exceed 1 percent between 1985 and 1999.

Since the 1990s and in particular since 1994, reform programs have been undertaken. A certain liberalization of exchange and agricultural prices was then observed. Nearly all the export duties were eliminated and partly passed on to the farmers in the form of higher producer prices.

The sector suffered from the preference given to cities by a system of budget policies which discouraged fanners’ participation.

The response from the various subsectors was extremely varied. For instance, rice production was unable to follow the pace of population growth, and as a result the country still imports rice despite the existence of a vast irrigation network.

The reforms managed to improve price incentives but they had less effect on other structural and institutional constraints. Indeed the government did not play its role of facilitator and regulator actively enough.

Institutional obstacles:

The land system and propriety rights are uncertain, which checks investments and the improvement of agricultural productivity. Not holding title to land is a barrier to credit access in that real estate constitutes the main collateral required by banks. Therefore the poor have great difficulty in obtaining bank loans.

As the poor basically grow rice, owning irrigated plots of land is an essential factor in improving their situation. Moreover, increases in taxes have not been compensated for by substantial investments in rural areas. Public investments in rural areas are neither sufficient nor truly effective.

Huge investments are needed for developing the agricultural sector. It is necessary to expand poor peoples’ access to assets, notably to land and credit.

Lack of service roads19: distance from various services and markets reduces production yield.

A study20 on the importance of transportation in rural development revealed that 33 percent of communes have no access to a national road and 30 percent have no access to a provincial road. Although one might think that transportation by bush taxi is possible in several communes at national level, people spend a lot of time (an average of 10 hours) in order to arrive at a bush taxi stop or a railway station. This average refers to the provinces of Fianarantsoa, Toamasina and Toliara. The length of time required may be as much as 20 hours in the province of Mahajanga.

The map below reveals that it is principally in the eastern part of the country that transportation development appears in the foreground of priorities. Serious transportation problems are concentrated in the region that connects Tolagnaro to Toamasina, except for the Manakara-Vangaindrano stretch. That is also the case for the major part of the northeastern region.

MAP 2:
MAP 2:

lack of roads linking the fivondronana

(according to the type of transportation generally used)

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Source: Commune census 2001, ILO Program, Cornell University with the cooperation of INSTAT and FOFIFA.

The same problem arises the case of access to daily market and extension services.

Table 8.

Madagascar: Access time to various services and markets using all means of transportation

(In hours)

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Source: EPM 2001 INSTAT

The absence of access roads greatly increases poverty in terms of rate as well as intensity. The more deprived of service roads the areas are, the higher the rate of poverty is.

The following table indicates direct relationships between the problems due to the absence of roads and other sectors of the economy such as agriculture. In fact, the least distant regions have rice yields twice the size of those of the most remote regions.

Table 9.

Madagascar: Situation of poverty according to remoteness

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Source: INSTAT, EPM 1997 and 1999.

The availability of a road in rural environments contributes to increased productivity, and therefore the living standard of rural families who can use it.

Table 10.

Madagascar: Impact of transportation costs

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Source: EPM 2001, INSTAT

Insecurity in rural areas

On the whole, security in rural areas is somewhat improved, except in the region of Antsiranana. Although the provinces of Mahajanga and Toliara considered insecurity as the most important problem to be solved in 2001, this was no longer the case in 2002. The improvement of security in these provinces is quite noticeable. The situation has also improved greatly in the province of Fianarantsoa.

Table 11.

Madagascar: Percentage of communes where security conditions are bad or very bad

(Perception of focus groups in percent)

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Source: Post-crisis survey 2002. Program ILO/INSTAT FOFIFA.

The success of the various interventions by the new government (increase in the number of personnel and security-maintenance interventions) expresses its willingness to reduce insecurity which prevailed all over the island prior to and during the crisis.

2.2.2.2.2 Health21

The state of health of the population is an essential element of well-being and a factor which contributes to an increase in workers’ productivity in the short term. If medical services are well directed towards women and children, the care will have long term impacts on their life expectancy and children’s mental and physical development.

Malagasy pupils are thought to have lost 3.5 million school days each year owing to diseases related to the environment22. It is therefore imperative to give health and environment high priority so as to reduce poverty and implement sustainable development.

Much stills remains to be done in order to improve the state of health of the Malagasy population

Health indicators enable us to assess the socioeconomic development level of a country. The infant mortality rate, for instance, reflects parents’ income, food security, access to drinking water, etc.

If one confines oneself to indicators contained in national inquiries (EDS, EPM, MICS), one sees that much remains to be done to improve the state of health of the population and in particular that of women and children.

For example, the Demographic and Health Enquiry (DHE) of 1997 indicates that although life expectancy at birth is 54 years (estimated at 57.5 years in 1999), it is only 40 years for 32 percent of the population.

The various mortality indicators (infant, juvenile and infant mortalities), show a decline on the whole, despite their rates, which are still relatively high, (97 and 159 respectively per 1,000 live births in 1997 versus 88 and 138 for 1,000 live births in 2000).

As for the childbirth mortality rate, the DHE estimated it at 488 deaths per 100,000 live births over the period 1990-1997 using the direct method of estimation. This means that Malagasy women still run rather serious death risks during their child bearing years.

uA01fig09

Trend in death rates

(for 1000)

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Concerning the vaccination coverage rate, it remains at a rather low level despite improvement in the situation from 1997 to 2000. In fact, less than half the children aged 12 to 23 months received all the vaccines recommended by the PEV (36 percent in 1997 versus 44 percent in 2000). The same holds as far as the protection rate against neonatal tetanus goes; the proportion of newborn babies immunized against neonatal tetanus was 35 percent in 1997 versus 48 percent in 2000. All these factors largely contribute to infant mortality. The administration of vaccines and the observance of the vaccination schedule combined with other factors of prevention (for instance, the quality of nutrition) make it possible to control, if not diminish, the impact of infectious diseases.

In spite of its small improvement (49.3 percent in 1997 versus 48.6 percent in 1999), the indicator of nutritional state (height for age index) gives information about the extent of malnutrition among children under 5.

Infectious diseases affect Malagasy children: AIDS essentially strikes the working population

The diseases which most affect the population, notably children, are acute respiratory infections, including influenza (21.6 percent), malaria (19.4 percent) and diarrheal diseases (8.4 percent). People of working age (25 to 59) and children under 5 are the most vulnerable to these diseases. In addition, diarrheal diseases constitute a huge public health problem affecting 50.9 percent of children under 5.

Communicable diseases like plague, bilharzhiosis, cysticercosis, leprosy and malaria constitute genuine curses to the population and worsen the poverty situation as a result of the insufficient number of weapons against them.

The first two cases of HIV infection were detected in Madagascar in 1987. The monitoring system applied from 1987 to December 2001 made it possible to spot 271 HIV-positive cases out 217,890 people tested, including 45 cases of AIDS.

uA01fig10

Evolution of HIV positivity rate

(in percent)

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

The virus essentially strikes members of the working population. The average age of HIV- positive people is 27.5 for women and 34.4 for men. In addition, 10.3 percent of HIV-positives are farmers. This means that HIV/AIDS risks aggravating poverty in Madagascar through a fall in production at the national level if effective measures are not taken quickly. The virus continues to multiply (see graph) although short- and medium-term plans for control were implemented in these periods. Its presence doubled during those first five years and trebled during the following five years.

Concerning non-communicable diseases which cause discomfort and handicap individuals and families (blinding cataracts, cancers, diabetes, mental and psycho-motor troubles, cardiovascular diseases), a rising incidence is observed. Placed within the poverty circle, these diseases are beginning to represent a burden for the society.

Hospitals and basic health centers are the most visited by poor families

Over the entire territory, public sector health services23 hold a preponderant place. They are the most used (59 percent of patients), particularly by poor families (78 percent of the poorest households). In rural environments these facilities are the most visited (61 percent). Private sector service providers include NGOs, church-run centers, and private physicians. They are used by 26.2 percent of the patients and visited rather by the rich (36 percent of the most well off). In urban environments, these private services are the most visited (38 percent of the consultations in the big agglomerations and 53 percent in the capital).

After the implementation of the UFP or Users Financial Participation, the quality of the services improved; on the other hand, there has been less access to medicines, especially for the needy. Besides, pending the implementation of the more acceptable system for all, the government temporarily suspended the UFP from mid-2002. This decision has entailed an increase in the visitation rate of health centers, which might give rise to a risk of inventory shortage in essential medicines in the public health clinics.

The income level constitutes one of the factors influencing the use of health services

The very low income level of the populations constitutes one of the main causes of their infrequent recourse to health services. Constrained by high food expenses (70.2 percent of total expenses), households earmark only 2.4 percent of their expenses for health. In addition, owing to the relative high cost of office calls, less than half the patients (45.9 percent) go to doctors’ offices. The cost of a single consultation (service fee, medicines, transportation and meals, etc.) represents 5 percent of the yearly average income of the poorest households, compared to 2 percent for the richest households24.

To these factors are added distance to or even absence of health centers and the shortage of medical personnel in some localities, and the non availability of medicines. About 60 percent of the population live within a radius of three miles or about one hour’s walk from a public health office. In rural environments, 37.2 percent of the consultation places are situated more than six miles away from the village people’s place of residence. One also sees an imbalance in the distribution of medical personnel: 21 percent of the population (mainly living in urban areas) are served by 41 percent of healthcare providers. On average, a physician takes care of about 10,000 inhabitants25 and most of the health personnel are located in urban areas. Incidentally, the proportion of female health personnel is lower in rural and no-access zones.

Public health expenditures on basic health services are very low

The health master plan 1998-2000 focused on implementing various sectoral reforms (reproductive health, integrated coverage of childhood diseases, vaccination and nutrition, health information systems, etc.), by increasing public expenditures allotted to this sector. Between 1995 and 2001, the share of the expenditures increased in relation to total public expenditures, from 3.4 percent to 6.7 percent; the percentage in relation to GDP rose from 0.6 percent to 1.5 percent. Still, the expenditures allocated to basic health services frequented by the poor represented only 4 percent of the expenditures, which is equivalent to a per capita annual amount of MGF 10,010 in 2000—a long way from the MGF 220,000 (US$34) recommended by the WHO to cover the costs of basic health services.26

uA01fig11

Trend in pubic expenditures allocated to health in MGF billions

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Source: Ministry of the Economy, Finance, and Budget
2.2.2.2.3 Education

Education represents a long-term investment in the individual’s productivity. Thus, finishing primary school reduces the risk of being poor by 5 percent; finishing secondary and university education reduces the risk by 17 percent27.

Education indicators reveal an alarming situation in education

In 2001, nearly half of the population were illiterate (48 percent), including 61 percent from rural areas (versus one-third for urban areas) and 50.6 percent of women. These percentages remained stable in comparison with the results for 1999.

Although these figures represent an improvement in comparison with 1997, all children of school age do not go to school, as evidenced by the net rate of school attendance in primary education, which was only 72 percent for the whole country28, 54.2 percent for the poorest quintile and 88.1 percent for the richest quintile. The rate of grades repeated is sizeable, affecting 30 percent of all the various different levels. Those who do not go to school or who abandon school early come in a large part from the poorest sections of the population, and this phenomenon is more marked in rural environments.

Concerning school achievement, we note that in primary education, only 33 percent of the pupils who enter the first year reach the end of the primary cycle and 18 percent of the pupils leave school before the end of the basic education curriculum without obtaining the necessary level of knowledge; we can also note the inadequacy of school and vocational guidance.

The differences between rural and urban areas are important, with 60 percent of the children in urban environments completing school versus only 12 percent for those living in rural environments.

The level of education varies according to area and gender

In the whole country, only 11.6 percent of the population complete secondary education or a higher level. The situation is even more worrisome in rural environments, where the percentage of those who have no education rises to 53.4 percent.

The table shows a disparity in educational level between urban areas and rural areas. For instance, in urban environments the percentage of individuals who have completed higher education reaches 5.2 percent, whereas only 0.8 percent of the rural population have attained this level.

Although the difference according to gender does not seem to be too striking, it appears that the females are nevertheless underprivileged. In fact, about half of the women (49.7 percent) have no education compared to 46.2 percent for men. Access to civic literacy must be promoted for girls in poor areas.

Table 12.

Madagascar: Distribution of the population according to levels of education, by place of residence and by gender

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Source: INSTAT EPM 2001

There is an obvious correlation between the educational level of individuals and the size and precariousness of their incomes, as shown in table 13.

Table 13.

Madagascar: Distribution of the population according to the level of education of the head of the household and the quintile of per capita consumption

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The table shows that the less educated one is, the poorer one is likely to be. Acquiring even a minimum of education (primary) improves the chances of getting out of poverty.

Poverty implies that the population cannot meet school expenses

Inadequate schooling is due to several factors. Poverty implies that the population often cannot meet schooling costs (school equipment, insurance costs, contributions to student parents’ association, school fees if any, maintenance of school buildings, etc.).

Parents have less confidence in the effectiveness of the educational system because of various problems related to it such as: inadequate education of the parents and school and vocational guidance, irrelevant curricula, shortage of teachers and pedagogical equipment, dilapidated school rooms, unmotivated teachers who moonlight, insecurity, etc. That is why they find it more advantageous to put their children to work to meet the family’s expenses rather than send them to school. The fact that the media are not accessible to all the population fosters a lack of interest among parents to send their children to school.

Moreover, there is as yet no clear educational policy concerning early childhood. The preschool rate is only 8 percent (source: Ministry of Education), is of questionable quality and is concentrated in urban environments, as well as isolated sectoral interventions; this leaves a major part of the target population untouched by full, integrated programs.

Also, distance in relation to school establishments and the deterioration of roads and rural tracks, notably during the rainy season, deter teachers as well as students and parents.

Informal education seems an alternative to the basic educational needs of the population

The de-schooling and school defection phenomenon constitutes one of the major causes of illiteracy. That is the reason why reinforcement of informal education appears as a credible and viable alternative to meet the basic educational needs of the population.

In Madagascar, poverty is multidimensional and manifests itself, among many other things, in the educational deficit of the population. One of its manifestations is illiteracy.

It has been noticed for a number of years that there is a multiplicity of NGOs and associations intervening in the social educational field, but their actions are dispersed and not well organized.

Technical and vocational training is not adequate

Problems regarding technical and vocational training are still topical. The existing action programs do not succeed in meeting the needs. Recourse to vocational training is still relatively low, which accounts for the low level of skills of the workforce.

It is clear that, despite the actions carried out by the PREFTEC to convince economic operators of the importance of vocational training, their capacities are limited and restrain the emergence of training needs. Moreover, qualifying vocational training offerings from the LTP and CFP are insufficient and not adapted to the real needs of the job market.

The need for a more realistic and pragmatic policy for enhancing human resources and the recuperation of deflated assets by implementing reforms in both rural and urban settings has not been felt as a necessity.

In higher education training is fragmented

Young people, who account for 40 percent of Malagasies aged from 13 to 35, are culturally disoriented and are largely marginalized on the socioeconomic level. Indeed, the government granted priority to the generalization of basic education and seeks to reposition higher education as the driving force of economic and social recovery and development.

The problems of higher education are: fragmented training, prohibitive unit costs, costly open professional sections and low proportion of teachers of professional rank.

The Universities do not possess instruments which might enable them to identify accurately the requirements of the job market.

Moreover, the system of resource management is inefficient and access to higher education remains the privilege of a very select minority.

Systematic evaluation is still alien to educators

Systematic evaluation is still alien to educators. It has been observed in visits to the field, through class observation and discussions with educators, that evaluation techniques are not mastered by educators in general and teachers in particular; the latter do evaluation in a routine manner and the practice of evaluation is not systematic for educators when carrying out their work.

Public expenditures for education are still small

The small size of total public expenditures in the sector no doubt constitutes a major cause of the problems observed in the education field. The credits earmarked for the education sector are small and those allocated to the informal sector and vocational training are insignificant. The credits earmarked for the sector29 represent less than 20 percent of total expenditures and involve around 2 percent of GDP.

uA01fig12

Trend in public expenditures allotted to education in MGF billions

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

However a new trend was begun in the course of the last few years by a policy of resource allocation which better reflects the priority assigned to education. For instance, between 1995 and 2000, allocations to education increased from 8.7 percent to 16 percent, that is from 1.5 percent to 3.1 of GDP. This increase made it possible, inter alia, to recruit new teachers for rural schools, reconstruct and rehabilitate some school facilities, pay teachers’ salaries promptly, and distribute didactic material and school supplies. As regards expenses for basic education, they progressed from 4.5 percent of the state’s total expenditures in 1997 to 7.7 percent in 200030.

2.2.2.2.4 Access to drinking water and sanitation

In 2000, access to drinking water, an essential element of health, was a concern at the national level for 24.4 percent of households or 23.8 percent of the population (59 percent in urban areas and 9.85 percent in rural areas). Among the poorest households, only 7 percent had access to drinking water compared to 43 percent of the richest (figures: EPM 99).

At household level, the province of Antananarivo is the best served (43.1 percent) owing to the fact that 92 percent of the households in the capital have access to potable water. It is followed by the province of Toliara (24.9 percent) which benefits from the contribution from various water projects (AES, impluvium, etc.).

Looked at in terms of population, the rates become 32.08 percent for Toliara versus 32.53 percent in Antananarivo. It is in the provinces of Toamasina and Fianarantsoa that one sees the lowest access rate (14.1 percent and 9.8 percent respectively of households, or 12.44 percent and 15.21 percent of the population) where the population gets its supplies principally from rivers, springs and lakes, numerous in these provinces.

Concerning sanitation, several aspects of services have to be taken into account. But in the fight against poverty, the essential basic service to be considered is the access to infrastructures for evacuating excreta.

For 2000, household access rates in percentage were 87.3 percent in urban areas, 52.2 percent in rural areas (MICS results for 2000). For all of Madagascar, irrespective of location, the percentage was 58 percent (only one household in two has a way of disposing of excreta) with pronounced differences between the provinces, the best equipped being the province of Antananarivo (84 percent), and the lowest rate observed in Toliary (13.5 percent). This situation was attributable to customs in certain regions.

2.2.2.2.5 Environment

Cause of Deforestation. Deforestation, one of the main environmental problems, constitutes a serious threat to biodiversity in Madagascar. The problems are the result of rapid population growth, generalized pauperization of the population, the need for land, the necessity of increasing food resources, and the increase in the need for firewood, lumber and wood for construction. It is estimated that the forest cover will disappear in 25 years if the present tendencies continue.

The acceleration of forest cover reduction can be said to be due above all to the practice of itinerant slash-and-burn farming (“tavy”) to meet the food needs of a sizeable section of the rural population, and to wood felling activities to satisfy energy needs.

Relations between poverty and environment. Poor populations are highly dependent on the environmental context and suffer significantly when environmental conditions worsen. Material destitution and the necessity to satisfy vital needs (food, energy, etc.) generate in the population behaviors jeopardizing the sustainable management of natural resources. The continuous deterioration of this natural capital actually mortgages the socioeconomic opportunity for environmental preservation and worsens the poverty situation. This accounts for the vicious circle: deteriorated environment–poorer population– more rapid deterioration of the environment.

In rural environments, the population is highly dependant on agriculture to ensure their survival. The impact of soil deterioration combined with the effects of price fluctuations brings about a decrease in agricultural productivity entailing a constant slide in incomes, deepening even more the pauperization of the agricultural population. This state of poverty fosters the clearing of new forest zones leading to a destruction of natural resources. Such situations make the rural economy vulnerable to the slowdowns of the global economy.

In urban environments, the most underprivileged populations are the most exposed to diseases related to pollution of the air and water, such as respiratory and intestinal diseases, malaria, etc. This entails a worsening of human health as well as a fall in productivity, which therefore limits economic growth.

The deterioration of water resources, the diminution of the fishery stock, intensive poaching, the illicit trade in native species and the irrational exploitation of the forest constitute so many problems affecting the most underprivileged populations both in rural areas and in urban areas. These latter populations become even more vulnerable vis-à-vis natural disasters (cyclones, floods, drought, etc.).

2.3 POVERTY EXPERIENCES

Poverty fosters the adoption of personal strategies which privilege the search for “miraculous” solutions in contempt of law, the integrity of the human person and environmental preservation.

Alienation: Poverty creates feelings of lack of interest in public affairs and the impossibility of taking part in social activities. It therefore appears logical that the Malagasy people composed of 70 percent of poor individuals, which corresponds in figures to about 10 million people, abstains more and more from expressing its choices. A survey carried out by the UNDP31 revealed that, at the various elections, the participation rate was 50 percent in the communal elections of November 14, 1999 and only 45 percent in the provincial elections of December 3, 2000, although the latter were meant to lead to the designation of the governors and senators.

Unrest/Instability: A certain distance has widened between ordinary citizens and the authorities; in this respect, the majority of the population does not believe in the will and ability of politicians. Such a situation weakens and increases the instability of the country’s political system. The level of poverty and the feeling of exclusion generates behaviors of revolt. This explains the events which struck the country in 1972, 1991 and 2002.

Deviance: The situation of the poor and the non poor who feel that they risk falling into poverty accounts for a craze for gambling, the decision to migrate or to emigrate towards more prosperous zones or countries, the recourse to delinquency, prostitution, the development of corruption, the overexploitation of non-renewable natural resources, the sale of assets, the rooting of a dual attitude of passivity/aggressivity vis-à-vis the authorities and foreigners, who are considered both as the potential source of and solution to the state of poverty.

Poor households react in several different ways according to economic shocks. A series of recent studies was aimed at understanding these reactions and under what circumstances the reactions make it possible to reverse the fall; also, under what circumstances the fate of the vulnerable populations worsens.

Chart:
Chart:

Impact of shocks on vulnerable households

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

Source: Cornell et al. (1999).

The chart shows the possibility of resorting to buffer mechanisms to avoid falling into regressive individual strategies—such as the selling of land, withdrawing children from school—which risk jeopardizing the future in order to preserve the present. Those who can do so have recourse to external support mechanisms to which they have access. A family may adopt both types of strategy simultaneously—first individual reactions, then recourse to institutional supports, since they are complementary.

Table 15 shows that the heads of vulnerable families resort in varying degrees to three categories of external support in case of emergency: mutual aid, gifts/donations and credit. Mutual aid operates within lineages and communities. It takes concrete form in reciprocal exchanges of manpower or material assets, which occur at the time of farming activities, funeral ceremonies, in case of accidents or misfortune incurred by a family (theft, fire, diseases).

Table 14.

Madagascar: Buffer institutions available to vulnerable households

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All shocks

C1 = Periodical and regular (tiding over period)C2 = Natural, unpredictable (drought, cyclones, locusts)C3 = Macroeconomic (price increases, unemployment)C4 = Biographical (diseases, accidents, deaths, separation, divorce)—= noneSource: Cornell et al. (1999).
Table 15.

Madagascar: General profile of vulnerability by Fivondronana

General profile of vulnerability by Fivondronana based on the poverty map33

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Donations—from the family, the church or NGOs—are also available in certain cases. In the event of divorce, separation, or death of the husband, women who find themselves suddenly at the head of a household often resort to land loans within the family. As for migrating workers, they send back money to the other members of the family (Dorosh et al. 1998; MaDIO, 1997). The attempts at quantification suggest that the transfers are larger (in absolute and relative terms) in urban areas than in rural areas. In rural environments, the biggest beneficiaries of net transfers are the poorest rural households. But in urban environment, the results are contradictory. Some suggest that they favor the richest; according to others, both the poorest and the richest benefit from them (MaDIO, 1997).

Loans are also available—from family, religious associations, shopkeepers and neighbors. The terms vary enormously according to the sources. (COMODE, 1999; Lupo and Raveloarimanana, 1999; Zeller, 1997).

These institutions, which have been operating for centuries, are at present undergoing major changes. Increasing pressure on lands, migration to towns and successive droughts lead to a strong call on traditional mechanisms, provoke failures and stimulate adaptations. In rural environments, community mutual aid mechanisms are loosing strength and evolving towards other forms, especially as regards credit. In urban environments, we witness the breaking up of families under the effects of these pressures; but at the same time one witnesses the birth of neighborhood solidarity associations. (COMODE, 1999; Lupo and Raveloarimanana).

Deficiencies

The mechanisms available to a given household often depend on the extent of the shock undergone. When a household undergoes a shock of some sort (death, illness, theft), it fosters resort to other households (gifts, loans, mutual aid) who are not affected by the event. Therefore, in the face of biographical shocks (C4) private safety nets function with relative efficiency. On the other hand, shocks which strike a group of households at the same time—like natural disasters (C2) and a macroeconomic slump (C3)—foster an external intervention, since they throw all the households into difficulties simultaneously. It is in these situations in particular that the buffer mechanisms risk breaking down completely.

Some vulnerable groups—notably the 4-MIs32 and the underprivileged casts—do not have access to the whole range of support. Private transfers are principally favorable to the rich town dwellers. The informal credit market also favors the better-off. The poorest, who present the greatest risks for lenders, find credit only at high interest rates.

In fact, there exists a positive correlation between economic and social capital. Households who possess enough resources can contribute to mutual aid ceremonies. A contribution in time of availability of resources functions as an informal insurance, putting the household in a position of creditor, entitled to appeal in turn for assistance in the future, when the need arises. The neediest—the 4MIs, the landless and the underprivileged casts—who are mainly debtors, are the least well served by these solidarity networks. Such networks play an important role with households that are average or poor, but fail to a great extent when faced with the requirements of the extremely poor.

2.4 POVERTY RISKS (VULNERABILITY)

Vulnerability can be defined as the probability of suffering the consequences of unpredictable events, or sensitivity to external shocks.

2.4.1 the types of risks

In fact, households face different sorts of risks in their lives: economic, social, environmental and natural. If these risks actually become shocks, they engender consequences and threaten the well-being of families, which can fall under the poverty line or push those who are already poor into dire poverty. This situation can make households vulnerable and can reduce their means for managing future risks.

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2.4.2 general profile of vulnerability

Faced with the situation of vulnerability, the ability to respond of the state as well as private and international bodies is still very limited. In fact, some weakness can still be seen in targeting vulnerable groups, lack of coordination and synergy of actions undertaken, insufficiency of indicators that might enable identification of the impacts of the various actions, and problems related to continuation of assistance after the donors’ withdrawal.

At the present time, the percentage of the population that benefit from social protection mechanisms is estimated at only 5 percent to 7 percent. Current interventions are only palliatives and not preventive measures, and do not provide durable solutions to the precarious situation of the vulnerable population categories.

2.5 COMPARISON OF THE MILLENIUM SUMMIT OBJECTIVES WITH THE SITUATION OF POVERTY AND STRATEGIC FOCUSES OF THE PRSP

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2.6 SCOPE OF ACTION

The government must provide itself with the means for carrying out its policy. On this point, it seems timely to present the elements and factors likely to limit and restrict its scope of action and those likely to enlarge it, with a view to understanding better the programs and actions to be implemented.

2.6.1 factors that limit and restrict the scope of action

The main lessons relating to weaknesses, threats, adverse tendencies as well as uncertainties, enable us to highlight the following aspects:

  • - Insufficient economic growth, in the past characterized by, inter alia, (i) weak economic growth which resulted from an insufficient level of investment (less than 15 percent of GDP) and (ii) a rather high demographic rate (about 2.8 percent).

  • - Constraining burden of indebtedness despite successive debt-rescheduling agreements and/or debt cancellation with the Paris Club concluded since 1981. The rescheduling agreements from 1997 to March 2001 (Paris Club IX) did not reduce the net present value of the debt in a substantial way, as by the end of the year 2000, the nominal outstanding external debt still stood at about SDR 3 billion.

  • - National industries and duty-free zones still fragile and weakened by the post- presidential election crisis: the prospects of growth drafted by the Association of Duty-free Zones and Partners (GEFP) in the course of the second half of 200134 included an estimated MGF 280 billion in investment for the period 2002-2004, which could bring about a boost in exports of 75 percent to 100 percent and create direct jobs numbering up to 110,000 to 130,000 by 2005; these forecasts now seem questionable and subject to downward revision.

  • - Strong sectors hardly mobilized for the time being, and still under the shock of the post- presidential election crisis.

  • - Accelerated population growth by comparison with the past: current rate of 2.8 percent, compared to 2.7 percent in 1975, 2.2 percent in 1966 and 1 percent up to 1950.

  • - Sluggish recovery from the crisis, with impacts in human and financial terms on public finance, in particular on the Public Investment Program.

  • - Uncertain energy supply with the prospect of war in Iraq impacting the price of oil.

  • - Limited capacity for investment by the state and the private sector irrespective of the source.

  • - Insufficient coordination among the players leading to a lack of synergy between actions in the field coupled with a multitude of approaches (case of the PCDs).

  • - Relatively high geographical concentration of certain actions and development instruments (PSDR, microfinancing, FER, PCD, AGERAS, GELOSE, priority action zones, etc.)

  • - Lack of synergy among actions undertaken; inadequate absorption capacity of financing; few incentives in the legal and regulatory framework (legal, financial, tax system); absence of a results-oriented and evaluative culture at the administration level; high degree of corruption.

  • - Strong tendency towards environmental deterioration (about 100,000 ha of forests continue to disappear every year) in spite of great efforts deployed to better preserve their integrity.

2.6.2 factors conducive to expanded scope of action

The strong factors, forces and opportunities that might enlarge freedom of action incorporate:

  • - Political will on the part of the government; requiring the players to contribute within a partnership framework (public/private partnership); and a participatory process;

  • - Participation of religious organizations and civil society in the implementation of development actions;

  • - Priority given to the facilitation and intensification of communication in physical, economic, social and cultural terms.

  • - Progressive tendency to decentralize development actions and instruments (RDSP, micro financing, FMF, CDP, AGERAS, GELOSE, priority action zones, etc.).

  • - Multiplication of supervisory agencies and intermediary agencies (NGO, consultants, etc.)

  • - Conspicuous willingness of international support bodies to really support Madagascar through the commitment to fund approximately US$2.477 billion at the Madagascar Friends Conference held in Paris.

  • - Attainment of a point of no return concerning privatization.

  • - Willingness to be actively inserted into the system of regional and international cooperation (COMESA, IOC, SADEC, NEPAD, French-speaking countries, African Union, etc.).

  • - Existence of opportunities and possibilities offered by the presence of numerous bi- and multi-lateral programs.

  • - The recovery of confidence by the great majority of Malagasies supported by the prospect of political stability after the results of the legislative elections.

  • - Development of TICs and enthusiasm for them on the part of youth.

In spite of the restrictive factors mentioned above, the promotion of rapid and sustainable growth does not lack major assets, which lie in the willingness of the state to constitute and implement the material and psycho-sociological objectives which will enable the start-up of the country’s development with more serenity. For this reason, the government’s freedom of action appears fairly large and calls for the setting of ambitious objectives to be reached through programs which, while ambitious, are realistic and remain within the nation’s reach.

  • Conclusion

In Madagascar, poverty has created the conditions for its geographic expansion and transmission between generations. Low incomes and the large portion of income allocated to food expenses in the poor families’ budget limit their access to basic health services, increase the drop-out rate, and the rate of abandonment of studies. The high rate of illiteracy shows not only the relative character of the success of recovery programs undertaken, but qualifies the effectiveness of future actions. Madagascar’s future adults are running the nearly certain risk of joining the already large group of uneducated heads of household, who are unlikely to seize the opportunities offered to improve their situation and that of their progeny: agricultural techniques, birth control, children’s education etc. The deterioration of the environment as well as the insufficiency and poor condition of infrastructures aggravate the poverty of the population.

Such situations must be avoided. The strategies adopted must be ambitious but at the same time realistic and feasible, so as to enable the poor to get out of poverty and the non- poor to avoid falling into it, all the while preserving the environment.

The government has at its disposal a range of intervention tools with which it can intervene on behalf of the poor in the short, medium and long terms.

Interventions liable to play an important role are ones that have an impact on the assets of the poor (land and manpower).

As a prerequisite, trust in governing officials, civil society and the private sector, on the part of the population and in particular the poor, must be revived. Therefore the institution of good governance is also essential.

In the short term, the key instruments are economic and financial strategies targeted towards restoring macroeconomic stability. In fact, mastery of inflation and a good fiscal strategy will directly influence product prices and consequently the level of household consumption.

In the medium and long terms, the most important instruments are public investment and current expenditure on infrastructures and the social sectors.

3 DEVELOPMENT OBJECTIVE, STRATEGIC FOCUSES AND GENERAL OBJECTIVES IN THE MEDIUM TERM

Acting as a reference framework for all the policies and actions regarding reduction in poverty, the PRSP has a place in a long-term perspective. To this end, the document proposes an operational approach made concrete by:

  1. Establishment of a medium-term development objective with targeted results;

  2. Implementation of strategic focuses of intervention which will enable players to identify the priorities and to draft various action programs (macroeconomic, sectoral, specific) as well as to facilitate the actions;

  3. Basic principles to be followed in the approach to executing the programs;

  4. An implementation schedule identifying landmarks spread out over time.

The basis for the strategy consists in fact in ensuring that all the operational actions undertaken through the various programs will be directed towards development of the economic, social, cultural, political, environmental, personal resources of the poor.

3.1 DEVELOPMENT OBJECTIVE

The development objective for Madagascar is promotion of a rapid and sustainable development in order to reduce the poverty rate by half in 10 years.

The fact of putting the concept of sustainable means of existence at the center of the basic concern of the strategy for reducing poverty corresponds quite accurately to the challenge of rapidity and sustainability which commands and should command the government’s principles and actions.

The implementation in the immediate future of innovative approaches as well as the search for positive impacts of the development for the benefit of the great majority of the population, viz. the poor in this case, means that at the present moment development with a double component consisting in the possession of and/or control over means of production and effectiveness of the enjoyment of the fruit of the growth, is and must be devised and carried out for and with the poor. It is in this sense that development is rapid.

The concern about basing development on a secure foundation by establishing, for the benefit of the great majority of the population, material conditions and psycho-sociological and legal frameworks (revival of identity values, effectiveness of the rule of law and good governance), means enlargement; consolidation and perpetuation of the development basis. It is in this way that development is sustainable.

By taking account of everything mentioned above, Madagascar proceeded to devise and implement a strategy that intends to be operational and effective, and capable of reducing poverty. Its objective consists in reducing the present poverty rate by half by 2013.

3.2 THE STRATEGIC FOCUSES

The diagnosis and analysis of the characteristics of poverty, the requirements and imperatives of a rapid and sustainable development in order to reduce the rate of poverty by half in ten years, the lessons drawn from the implementation of previous programs, as well as the recommendations from the various international and/or regional summits in which Madagascar has participated, enable us to circumscribe the three major strategic focuses around which actions to be taken in the course of the next three years (2003-2006) will be articulated.

3.2.1 Strategic intervention focus no. 1: Restoring the rule of law and a well governed society

This focus, whose objective is to ensure an environment favorable to rapid and sustainable development, groups together actions related to the renewal, improvement, modernization, reinforcement and development of an institutional framework of good governance. This focus will allow the state to assume effectively and with transparency its role of facilitator and driving force of the economy, and it will also allow the private sector to create wealth and jobs; as for civil society, it will serve as the intermediary between the people and the state, explaining, and making the population aware of its rights and responsibilities.

In order to institute the rule of law and ensure a well-governed society, the government has defined 4 overall objectives:

3.2.1.1 Overall objective No. 1: Ensure good governance and carry through the fight against corruption

The attainment of this objective requires the fulfillment of intermediary objectives, namely:

  • - Establish a reliable information system necessary for knowing the country’s economic and financial situation.

  • - Implement a budget policy.

  • - Fight against corruption, ensure transparency and improve the quality of services rendered at ministry level.

  • - Put in place a transparent and effective civil service at the service of the citizens.

3.2.1.2 Overall objective No. 2: Respecting democracy

Democracy: free elections, status of the opposition, respect for human rights; freedom of speech of the media will be respected with transparency and respect for the people’s choices.

3.2.1.3 Overall objective No. 3: Instituting the rule of law
  • In order to restore the rule of law, the intermediary objectives to be reached are:

  • - Ensuring an equitable, healthy system of justice respectful of human rights and instilling a feeling of security as regards investments.

  • - Ensuring the protection of persons, their assets and their productive activities.

3.2.1.4 Overall objective No. 4: Bringing the government closer to the citizens through decentralization and devolution

Devolution and decentralization of services ensure high-quality, accessible services. The following intermediary objectives are linked to decentralization and devolution:

  • - Creation of a context favorable to economic and social development of the communes, the improvement of their financial autonomy and awareness of their responsibility;

  • - Strengthening the institutional capacities of the communes.

3.2.2 Strategic intervention focus No. 2: Foster and promote economic growth on a much enlarged basis

Strategic focus No. 2 requires the attainment of the overall objectives, namely: (i) reaching an economic growth rate of 8 percent to 10 percent; (ii) improving the investment rate so as to reach 20 percent; (iii) stimulating the dynamism of the private sector so that it takes part in investment to the tune of 12 percent to 14 percent; (iv) opening up the Malagasy economy to greater competition with a view to reducing costs and improving quality; (v) fostering the population’s will to participate.

3.2.2.1 Global objective No. 1: Reach an economic growth rate of 8 to 10 percent

In order to reach a high annual rate of growth on the order of 8 percent to 10 percent, the government will increase its efforts to extend the investment field by implementing and reinforcing macroeconomic stability and a wider opening up and diversification of the economy.

The following intermediary objectives will be pursued:

  • - Ensure macroeconomic stability.

  • - Exploit the economic potential of the country through:

  • i) Promotion of tourist and eco-tourist development which preserves the natural environment and socio-cultural identity.

  • ii) Increasing the contribution of the mining sector to Madagascar’s development.

  • iii) Ensuring food security and optimize the use of fishery resources.

  • iv) Preservation of the unique environment and biodiversity of Madagascar.

  • v) Building and maintaining roads, developing urban centers, improving the productivity and efficiency of the transport system.

  • vi) Doubling household access to electricity.

3.2.2.2 Global objective No. 2: Improve the investment rate so as to reach 20 percent

The ambitious objectives in economic growth require a high level of investment.

The following objectives are targeted:

  • - Pursue and strengthen the improvement of macroeconomic management;

  • - Increase national savings;

  • - Mobilize international savings, especially through direct foreign investment.

3.2.2.3 Global Objective No. 3: Foster the dynamism of the private sector so that it participates in the investment rate to the tune of 12 percent to 14 percent

The economy is sustained by activities directed towards exports, in particular duty-free zones, tourism and mining.

To this end, the following intermediary operational objectives will be taken into consideration.

  • - Promoting private, national and foreign investments;

  • - Promoting partnerships between the state and the private sector;

  • - Reinforcing national competitiveness;

  • - Fostering greater dynamism among Export Processing Zones.

3.2.2.4 Global objective No. 4: Open up Madagascar’s economy to greater competition with a view to reducing costs and improving quality.

Recapturing regional and/or international markets necessitates not only the promotion of Malagasy products but also the continuation and improvement of competitiveness.

The intermediary objectives consist in:

  • - Ensuring the integration of Madagascar into SADEC;

  • - Strengthening partnership with the various international and regional organizations, to which Madagascar belongs;

  • - Multiplying diplomatic and commercial relations with African countries.

  • - Promoting the development of economic and commercial functions of Madagascar’s embassies.

3.2.2.5 Global objective No. 5: Foster the willingness of the population to participate

To be effective and durable, the implementation of the poverty reduction strategy requires the total support and mobilization of the population, especially the poor, in the various activities. Awareness and consultation actions will be necessary to convince them to get involved deeply in the procedures and to appropriate the fruits of the efforts. The following objectives are targeted:

  • - Ensure intensive citizen education;

  • - Induce women and marginal groups to participate actively;

  • - Consult the regions, entrepreneurs and end-users when deciding on the drafting of various programs.

3.2.3 Strategic intervention focus No. 3: Foster and promote systems for ensuring human and material security and enlarged social Protection

The objective of this focus is to ensure that every Malagasy can benefit from the fruits of growth. The constitutive elements of this focus deal with the definition and implementation of systems of management that are geographically spread out and supportive; programs of food security, health, education, housing, the environment, etc. The commune, as the main local service provider, will serve as the anchoring point for all actions undertaken within its competence.

In fact, in addition to widening the base of development by strengthening every individual’s assets, this focus aims at enhancing human capacities through education, and improvement of health and nutrition, because an increase in human potentialities and a sustainable economic growth can reinforce each other mutually.

Other objectives include:

  • - Ensuring employment to all individuals of working age, by promoting job placement activities, creating productive jobs, ensuring relevance of professional training to the needs of the labor market, and improving the IT systems involved in employment.

    • - Improving workers’ condition by honoring Madagascar’s obligations towards the International Labor Organization, by implementing programs aimed at promoting the fundamental rights of workers on the job, by updating and disseminating labor legislation and making sure it is applied;

    • - Defending the social rights of workers by improving the current system of social protection, extending the system of social protection, and drawing up a plan for strengthening the prevention of workplace hazards.

The global objectives listed below are meant to be relevant in view of the dimensions of poverty in this area. They are:

3.2.3.1 Global objective No. 1: Ensure basic education for all Malagasies–“Education for all”; train and enhance the value of the country’s human resources

The government will pursue this objective by:

  • - Gradually instituting a nine-year quality basic education system;

  • - Reducing the repeated grade rate in the first cycle of basic education (primary) and striving to enable all Malagasies to complete the cycle;

  • - Ensuring equality of access to education;

  • - Training and teaching young people according to their socioeconomic needs at both the national and the regional level;

  • - Developing the production and working capacity of assets in the basic, traditional, non- industrial sectors of production.

3.2.3.2 Global objective No. 2: Ensure the quality of education at all levels

The quality of education will be ensured by:

  • - Providing young Malagasy people with knowledge and human capital;

  • - Improving the quality of the school syllabus in secondary education, vocational training, and professional and higher education.

3.2.3.3 Global objective No. 3: Promote the health of mother and child

The objectives aimed at are the following:

  • - Attainment of a vaccination coverage rate of at least 80 percent for all the PEV antigens among children aged 0 to 1 year, and 80 percent for anti-tetanus vaccine (VAT 2) for pregnant mothers;

  • - Reduction of maternal mortality from 488 to 285 per 100,000 live births;

  • - Reduction of the infant mortality rate from 96 to 72 per 1,000 live births and infant-to-juvenile mortality from 156 to 111 per 1,000 live births.

  • - Transformation of 100 percent of the schools into “Health Schools”.

3.2.3.4 Global objective No. 4: Intensifying malnutrition control

The objectives aimed are as follows:

  • - Reduce hospital mortality caused by severe malnutrition among children under five from 26 percent in 2002 to 15 percent in 2005;

  • - Reduce the percentage of children with hemeralopia from 1.9 percent in 2001 to less than 1 percent in 2005;

  • - Reduce the prevalence of malnutrition in children under five from 48.6 percent in 2000 (EPM) to 36 percent in 2005;

  • - Improve coordination of interventions and resources.

  • - Ensure monitoring and evaluation of activities related to the nutritional situation.

3.2.3.5 Global objective No. 5: Strengthen communicable disease control
  • By 2005 the intermediary objective is to reduce by 50 percent the socioeconomic burden of the main communicable diseases.

3.2.3.6 Global objective No. 6: Reinforce non-communicable disease control

The strategy consists in :

  • - Drafting a National Program to Fight Against Cardiovascular Diseases (MCV and diabetes);

  • - Establishing diagnostic and care facilities;

  • - Setting up a referral system and promoting social mobilization;

  • - Integrating prevention activities into health training;

  • - Standardizing referral centers;

  • - Setting up specialized services;

  • - Developing operational research on non-communicable diseases.

3.2.3.7 Global objective No. 7: Reduce social exclusion in the rapid and sustainable development process

The intermediary objectives for reducing social exclusion consist in:

  • - Developing extension work on family planning;

  • - Intensifying the fight against illiteracy;

  • - Implementing a social security system for vulnerable and marginalized groups;

  • - Promoting the inclusion of the population dimension by gender in the development programs;

  • - Encouraging participation by civil society in the social projects.

3.2.3.8 Global objective No. 8: Promote cultural diversity

The intermediary objectives are:

  • - Developing socio-cultural activities for the young;

  • - Promoting the development of individual and team sports;

  • - Ensuring the development of activities for prevention of social scourges.

Concerning culture, the objective consists in making of culture a driving force for development.

  • - Promoting culture domestically as well as abroad;

  • - Promoting cultural diversity;

  • - Encouraging the development of arts and letters.

4 POVERTY REDUCTION AND ECONOMIC GROWTH

Based on a household survey undertaken by INSTAT in 2001, the rate of poverty is estimated at 69.6 percent. The Millennium Development Goal (MDG) is to reduce poverty by half between 1990 and 2015. In 1990 no information about poverty was available, but by using the 2001 data as a basis, the objective in 2015 would then be to reduce the rate of poverty to 34.2 percent.

Having opted for rapid and sustainable development, Madagascar envisages going beyond the Millennium objective and reducing the rate of poverty by half in 10 years, that is by 2013.

Economic growth is a sine qua non condition for creating wealth and development. However, a significant reduction in poverty rate is not possible without strong, better distributed growth.

The graph below gives simulations of growth rates necessary for reaching three poverty reduction scenarios:

  • - Scenario (1): Reduce the level of poverty rate by half in 10 years;

  • - Scenario (2): Reduce the level of poverty rate by half by 2015 (Millennium objective);

  • - Scenario (3): The average annual growth rate of the Malagasy economy reaches only 4.5 percent, the average for the period 1997-2001.

A01fig03

Graph: Reduction of poverty and economic growth

Citation: IMF Staff Country Reports 2003, 323; 10.5089/9781451825312.002.A001

In order to reduce poverty by half within 10 years, an average rate of economic growth of 8 percent per year is a prerequisite. Macroeconomic projections geared to the strategy of poverty reduction calls for a rise in annual per capita GDP of 5.2 percent. Such projections are based on maximum assumptions of public and private investment driven by a substantial increase in public investment and foreign direct investment flows: the required average investment rate is 21 percent of GDP.

Public investments must be well conceived and well targeted, and be responsive to the expectations of the Malagasy population and private investors. To that effect a sizeable portion of these investments will be earmarked for government priorities (governance, rural development, infrastructures and the social sectors) with a view to the improvement of the well-being of the Malagasy population.

Private sector investments are expected in the major strong growth sectors: rural development, fishing, mining, manufacturing industries (especially those directed towards exportation), public works and tourism.

The medium-term macroeconomic accounts for 2004-2006 corresponding to this scenario are detailed in the Annex.

With an average annual economic growth rate of 4.5 percent (Scenario 3), about half (49.2 percent) of the population will still be poor in 2013. The average investment rate is 12 percent of GDP.

Table 16.

Madagascar: Reduction of poverty and economic growth

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Source: DGE/MEFB

5 IMPLEMENTATION OF THE STRATEGY

The actions in the poverty reduction strategy paper must be implemented from a regional development perspective. Therefore, the following guiding principles must be considered:

To give a priority to regional and local integration: it is necessary to reinforce the development of local and regional economies as well as inter-regional economic relations. This will call for the preparation of a series of spatial and conceptual reference schemes and a number of spatial investment strategies such as urban investment strategy, rural development strategy, industrial localization strategy...

To enable activities in leading growth areas (buoyant and/or export sectors) to function with maximum efficiency with a view to making re-distribution towards other regions possible: instead of dissipating efforts, existing resources should be employed and maximized. Any policy to disperse efforts would be extremely costly, as everything would need to be done in several places at once.

To give special importance to the human and economic environment of projects more than to their purely technical aspects: each investment must be afforded the opportunity to function normally, its effects must be as far-reaching as possible, and the population must take ownership of it.

To take account of regional criteria when defining sectoral or economic actions: the success of the strategy will depend much more on the coordination over time and in space of multiple sectoral actions as well as the coordination in space of numerous legal and regulatory measures (tariffs, tax system, credit...) decreed by the public authorities. This involves defining a public investment strategy to make the actions carried out by several different ministries—even several different departments of the same ministry—coherent.

To stop the process of natural resource depletion: in order to stop the deterioration of the environment, all major projects should be subject to impact studies during the design phase and appropriate measures should be taken during their implementation.

To develop the technical capacity of the communes with a view to enabling them to participate in their development: given the present lack of capacity of the communes as far as development management is concerned, they need to be trained, coached, supplied with institutional and technical tools so that they can really take charge of their development.

To implement mechanisms to enable the populations concerned to really participate in the choice of investments choices to be made in their areas and to give them a sense of responsibility for the implementation, maintenance, and functioning of these projects: the participation of the beneficiaries is essential at all stages of the projects (identification, formulation, financing, setting-up, functioning...). Mechanisms for participation adapted to the real capacity of the beneficiaries must be therefore instituted.

To encourage and guide private investor interest toward a regional approach: such action implies that the regions need to create the conditions for attracting and developing the private sector.

To bring to fruition the public-private partnership: it will be necessary to set up specific mechanisms to coordinate government actions and those of the regions as well as those of the private sector. In the short term, the use of existing credit lines in the Public Investment Program is possible. In the long term, in addition to setting up loan and subsidy structures, it must be ascertained how a genuine contractual relationship could be developed between the Government and the regions, the Government and the private sector, the regions and the private sector.

The PRSP has retained fifteen (15) operational programs for implementing the strategy. Such programs were derived from ongoing actions being taken (ongoing programs and projects). They also take into consideration at the same time the new governmental trends, the recommendations resulting from the project portfolio reviews (World Bank, UNDP, France- Madagascar Cooperation...) with a view to restructuring/refocusing them, the approach as well as the objectives in the strategy framework. In addition, the activities thought to be priorities not covered by the ongoing programs require the adoption of new operational programs.

It should be recalled that strategic intervention hinges on areas through which actions and operational programs can have a decisive impact on the principal dimensions of poverty. In order to move from vision and strategic focus to real actions, the Government adopted an approach including (i) the formulation of various business plans and action plans with operational programs and (ii) the establishment of the monitoring modalities and criteria in implementing the strategy. The object of the approach is to ensure that the activities proposed by each of the focuses will be included in a program of real actions.

The table below summarizes the programs.

Table 17.

Madagascar – Poverty Reduction Programs

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The operational programs comprise three broad categories, namely:

  • vii) Sectoral programs such as rural development, education, health, drinking water....

  • viii) Thematic programs (governance and corruption control, governance and human rights, local governance....), and

  • ix) Multisectoral, specific or cross-sectional programs

5.1 PROGRAMS FOR ACHIEVING THE OBJECTIVES OF STRATEGIC FOCUS NO. 1

5.1.1 Governance and the fight against corruption

Fighting against corruption is a determining factor in the practice of good governance. The government has shown a commitment to fight against it, to be successful in its policy of fast and sustainable development and particularly within the framework of implementing measures to improve public affairs management.

The objectives to ensure good governance and to succeed in the fight against poverty require that everyone adhere to the principle of public-private partnership (PPP) and the development of a spirit of citizenship.

5.1.1.1 Fight against corruption

In the framework of its commitment to fight against corruption, the Government has set up the High Council against Corruption under the authority of the President of the Republic by Decree 2002-1128 of September 30, 2002.

The responsibilities of this Council are: (i) to develop national strategy to fight against corruption, (ii) to participate in the preparation of appropriate laws, (iii) to draft texts relating to the creation of an anti-corruption agency, (iv) to monitor the impact and results of the anti-corruption program.

This Council comprises seven members and has a permanent secretariat headed by an executive secretary appointed by decree of the President of the Republic. For its functional needs, the Council receives funds from a special government budget appropriation.

Besides, for the main purpose of promoting transparency in the exercise of public functions, Decree 2002-1127 of September 30, 2002 instituted the obligation for ministers, civil servants holding posts of high responsibility at levels equal or superior to that of ministry director, and magistrates to make a periodical declaration of assets. An agency in charge of receiving and assessing the above-mentioned civil servants’ declarations will be established.

In addition, to intensify the fight against corruption, the programs of the Government are:

  • - strengthening the anti-corruption plan to contain or to prevent corruption while repressing all proven instances of corruption;

  • - implementing a range of actions aimed at reorganizing public services, building capacity among staff, rapidly processing documents;

  • - setting up ‘one-stop shops’ throughout the country and opening lists of complaints;

  • - setting up an anti-corruption agency in every ministry;

  • - intensifying Information-Education-Communication actions, namely civic education in schools and at all levels;

  • - reducing corrupt practices and favoritism in the civil service, disseminating texts on conduct and ethics;

  • - setting up institutional plans to make the High Council against Corruption operational.

5.1.1.2 Civil Service Reform

The Government is planning to set up a transparent and effective civil service to serve citizens within a framework of good governance.

To fight against corruption and favoritism (priority actions), the following actions will be started:

  • - depoliticization of the administration and appointments based on competence and merit;

  • - updating and disseminating legal and regulatory texts as well as changing mentalities;

  • - requirement that senior civil servants declare their assets periodically;

  • - developing a favorable working environment (environmental incentive);

  • - instituting performance-based compensation (salary incentive).

In order to prepare and carry out a program of civil service reform:

  • - Modernize the management of civil servants by setting up a single data file by;

  • - developing human resource networks between the different Ministry departments ;

  • - setting up an internet network.

  • x) Ensure the quality of the professional training of civil servants by:

    • - ensuring that 100 percent of graduates from training schools are prepared to serve the administration;

    • - developing appropriate training in every department.

  • xi) Inform civil servants and users periodically of civil service activities by:

    • - using the appropriate means for ensuring transparent and permanent information for users (negotiate agreements with the mass media and design periodical news broadcast programs);

    • - reinforcing the communications system at all levels (central, provincial, sub-prefecture).

  • xii) Get monthly reliable monitoring and evaluation data for decision-making regarding the management of human resources through:

    • - establishment of monitoring and evaluation structures in all central and provincial directorates;

    • - development of a program of human resource training in monitoring and evaluation;

    • - monthly consolidation of data on human resource management reform.

For 2003, the expected outcomes of civil service reform are:

  • - a 25-percent reduction in the number of civil servants brought before the Disciplinary Committee (CODIS) for corruption;

  • - 40 percent of the reports on the management of the civil servants reaching the Civil Service Ministry processed and regularized;

  • - 10 percent of the training needs of each ministry satisfied;

  • - plans to establish ENAM (National Malagasy Administration School) implemented;

  • - general statutes for civil servants validated and adopted.

5.1.1.3 Public affairs management

Accountability, rigor, streamlined and transparent procedures and results, and effectiveness are essential to good economic governance with internal controls throughout the administrative expenditure chain and the creation of the “one-stop-shop” system wherever possible.

The efforts made in this area will be continued on and increased. There will be continued strengthening of institutional capacity in the budget management process, the customs and fiscal services, the justice system, the General State Inspectorate (IGE), the Directorate General of Committed Expenditure Control (CDE), the Central Procurement Commission (CCM), and the Audit Office.

Implementing a reliable system of information necessary to know the financial situation of the country in order to make specific contributions to the development of the financial system, consists of the following actions:

  • i) Produce, use, coordinate, and disseminate statistical and economic information, namely:

    • - having exhaustive, reliable, information in real time to help make decisions regarding economic and development policy;

    • - setting up a system of regional information;

    • - ensuring that foreign trade statistics are reliable;

    • - accelerating the processing of operations and the production of accounting data.

  • ii) Contribute to the development of the financial system:

    • - take action to mobilize savings;

    • - facilitate corporate access to bank financing;

    • - contribute to the establishment of the modem financial market;

    • - gradually liberalize and stabilize the insurance sector;

    • - improve the legal framework for foreign exchange;

    • - acquire better information on the private sector by setting up a central balance sheet unit;

    • - gradually integrate the informal sector by establishing approved management centers after rewriting the General Chart of Accounts (PCG) to current international standards.

With a view to implementing an effective budget policy (relevance and impact of resource allocation for poverty reduction), the following actions will be taken:

  • - reform public finance:

    • strengthen budget control,

    • achieve more speedy, economical and transparent program management in reaching objectives,

    • strengthen monitoring agencies and institutions (General State Inspectorate, Committed Expenditure Control, Central Procurement Commission, Audit Office) (see Box 5 below);

  • - implement a budget policy as an economic steering and promotion instrument:

    • control the planning, execution and monitoring of the budget through reinforced multiyear budget planning and monitoring frameworks and rational budgetary choices,

    • use the taxation system as a tool of development,

    • manage public debt proactively by defining policy,

    • modernize customs by developing a partnership with a supervision company stressing control of the value and transfer of know-how,

    • give priority to the participative approach by consulting with partners for a better understanding of actions by the public authorities;

  • - increase revenue to reach international standards for the tax ratio.

  • Tax revenue:

  • - continue actions to collect and track arrears,

  • - make the structures are secure by building the capacity of tax offices,

  • - make tax revenue secure by computerizing tax offices,

  • - expand the tax base by including high-yield activities in forward planning, implementing a circuit of crosschecks with public expenditures and imports, as well as through on-site checks with delocalized services,

  • - harmonize the calculation of market value (taxes) by establishing a single methodology in all the offices,

  • - foster the integration of the informal sector by continuing actions to raise tax awareness in the informal sector.

  • Customs revenue:

  • - make customs receipts secure through the computerization of all areas of customs.

  • Nontax revenue:

  • - improve the collection of nontax revenue by increasing the rate of collection of dividends and revenue from the counterpart value funds (FCV), control and monitoring of debtor companies,

  • - control over public expenditure and distribution in accordance with overall sectoral objectives.

Actions to be taken are:

  • reinforce the budget planning and monitoring frameworks to implement the monitoring and assessment system,

  • control the planning, execution and the monitoring of the budget,

  • better adjust public expenditure planning to objectives with a view to setting up a national budget execution framework that is coherent, transparent and manageable by all those involved and by private individuals,

  • set up a computerized integrated management system and draft the related procedure manuals,

  • clean up the civil service database,

  • improve working conditions and build capacity,

  • institute new decentralization and project management procedures, in agreement with international donors, with a view to transferring know-how and decentralizing large projects.

  • - Coordination of external assistance by the following actions:

    • reduce the debt burden to a sustainable level by continuing negotiations on debt restructuring,

    • reduce the outstanding external debt making service payments when due, monitoring programs under the HIPC Initiative, and implementing commitments before reaching HIPC completion point,

    • raise external financing to meet development objectives and government economic policy by negotiating new external financing and disbursing signed grants and loans,

    • train personnel,

    • update data.

With a view to eradicating corruption, tailoring the public expenditure program to its objectives, ensuring transparency and improving the quality of the services provided by the ministries, the following actions are to be taken:

  • iii) Fight against corruption

    • - make public users and ministry staff accountable by simplifying and publishing procedure manuals, informing users of such procedures, making payment modalities transparent and improving the staff compensation system,

    • - adopt a program to fight against corruption by creating an anti-corruption central office responsible for receiving complaints and reports,

    • - combat fraud by reinforcing controls and by bringing the administration closer to users.

  • iv) Transparency of procedures and accounts

    • - ensure that procedures are transparent by simplifying and communicating customs clearance procedures,

    • - improve the legal apparatus by drawing up and disseminating the implementing interpretive texts of the General Tax Code,

    • - draw up the Government’s final accounts in order to improve financial governance,

    • - implement a national budget execution framework that is coherent, transparent and mastered by all those involved in the budget and by private partners. This implies, updating regulatory texts relating to budget execution, monitoring government assets and procurement contracts,

    • - standardize accounting methods by continuing to rework the general chart of accounts.

  • v) Improvement of the quality of services provided by the ministry

    • - reinforce human resources,

    • - strengthen the staffs’ capacity for enhanced skills in the execution of their work through the implementation of the training programs in Customs and in the Treasury,

    • - renovate and maintain the Treasury buildings and furnish them,

    • - enhance the reliability and rapidity of processing by setting up an internal communications network, strengthening the computerized management and processing of payroll and pensions, as well as by speeding up payments to government creditors,

    • - reorganize payment facilities,

    • - improve working conditions,

    • - improve supplies to the main revenue collection offices,

    • - speed up customs clearance by limiting inspections at the customs border and limiting ex post control in companies.

  • vi) Implementation of a system of internal control

    • - make audit and inspections systematic,

    • - audit needs and capabilities in order to build the capacity government staff,

    • - implement a complete program of institutional strengthening by modernizing services, giving staff more responsibility and instituting performance indicators as well as continuous training and professional development,

    • - give agents incentives for a better efficiency in their work (career management).

Within the scope of reforms:

The Government has made the decision to sign a contract with the Société Générale de Services (SGS). The program is not confined to pre-shipment inspection but also contains a program which provides places great importance on modernization of the Customs system in Madagascar together with technology transfer. The program with the SGS will begin on April 1, 2003.

The Ministry of the Economy, Finance and Budget has just set up a Directorate General of Internal Audit (DGAI), placed directly under the responsibility of the Minister of this department and whose main mission will be to control on a day-to-day basis the smooth running of all the ministry’s activities. The DGAI will work with the police. The same structure should be set up in the other ministries. A special directorate for financial delinquency has been created.

Main outcomes expected in public affairs management

Implementation of a reliable information system:

  • - website taking account of the users’ needs, available

  • - system of regional information, operational

Contribution to the development of the financial system:

  • - guarantees and loans, granted

  • - flight of premiums abroad, limited

  • - law and licensing of institutions, enacted

  • - central balance sheets unit, operational

Public finance reform:

- legislative and regulatory texts have been ranked, enhanced quality-wise, modernized, adapted and supplemented by operating and procedure manuals, daily activity management tools (internal and external management)

Increased revenue:

  • - tax ratio, acceptable (12 percent in 2006)

  • - tax revenue collection rate, increased

  • - FCV collection rate, up 3 percent per year

  • - 30 tax offices set up or rehabilitated for the second half of 2003

  • - 30 tax offices computerized for the second half of 2003

  • - crosschecks with expenditures and imports, performed for the second half of 2003

  • - ASYCUDA ++, functional in 2003

Public expenditure control:

  • - budget Law presented in Public Expenditure Program (2004-2005)

  • - database file on Government personnel, updated (2003-2005)

Coordination of aid:

  • - restructuring agreements with the Paris Club and other creditors, finalized

  • - printouts and schedules of tasks in projects, completed:

    • - 2003: FMG 930 billion

    • - 2004: FMG 1550 billion

    • - 2005: FMG 1850 billion

    • -

Fight against corruption

  • - anti-corruption office, publicly announced in 2003

  • - procedure manuals and guides, simplified

  • - level of purchasing power, improved

Transparency in procedures and accounts

  • - customs clearance time, reduced

  • - new single customs declaration form (DDU), applied

  • - Treasury balances and settlement laws, produced

strengthening budget control

In April 2001, the Government completed a study on strengthening budget control, consisting of a program of measures which envisages the redrafting of legislative and regulatory texts and the organic restructuring of control units. The program also plans to draft procedure and operating manuals, install information systems and performance measurement, prepare training programs, and include in the budget the following control units and institutions:

  • - The General State Inspectorate (IGE) will be permanently assigned the task of internal auditing and performing ad hoc operating audits as part of its mission or as a means of self-supervision [auto saisine]. The General State Inspectorate will have universal functions covering all public entities (central government, the autonomous provinces and their decentralized local government, national statutory authorities – EPN – provincial or local) and all entities benefiting from public financing in Madagascar or abroad.

  • - Committed Expenditure Control (CDE) will take back its traditional name Financial Control, and will be part of the payment authorization process for expenditures by central government or the main governorships within the framework of the control system envisaged in the national law. This will ensure that the entities submitting applications for prior approval have complied with the internal control regulations, which will be progressively established in those entities.

  • - The current Central Procurement Commission (CCM) which will be set up as an autonomous administrative control structure, and the specialized and provincial procurement commissions will not only verify compliance with government contracting procedures, but will play an identical role, in contracts presented to them for their approval prior to the endorsement by Financial Control, certifying that the services were provided. The new structure will receive the contracts financed with the provincial budgets for the purpose of setting up a database.

  • - The Audit Office reviews the accounts of public accountants, controls the execution of the budget laws, and assists the Government and members of parliament in monitoring implementation of the budget laws. It rules on appeal on decisions made by financial tribunals on the management of decentralized local governments in the autonomous provinces. It will also strengthen its management audits of public enterprises and all establishments receiving financial help from the Government.

  • - Administrative Tribunals and Financial Tribunals installed in the capitals of each province will play the same role at the level of the autonomous provinces and decentralized local governments as the Council of State and the Audit Office plays at the level of central government, with the exception of appeals.

  • - The rules of internal control, internal audit, external audit or operating audits will be patterned on standards generally accepted internationally. Human resources will be strengthened, motivated and subject to strict rules of ethics and professional conduct. The four inspection or control units and institution will have appropriate working tools (operating and procedure manuals, information systems, and performance measurements). They will be provided with a specific budget for missions and mandates, regarding the objectives set in their annual work plan, including expected outcomes and performance. The ordinary operating and investment budgets will include Information-Education-Communication actions and training activities.

Specifically, capacity building measures and actions for the four inspection and control units and institution, which must be carried out over three years (2001-2003), will include:

  • - review of texts on improving the operation of the four control or inspection units and institution (joint arrangements and individual arrangements for each unit or institution);

  • - drafting of quality, ranked legislative and regulatory texts including the design of a simplified durable and stable legal framework for budget execution;

  • - legislative and regulatory texts dealing with deconcentration-decentralization;

5.1.2 Governance and respect for democracy

Democracy requires the active participation of the people in public affairs by freely electing the government. It means ensuring that free elections function smoothly, are fair, transparent, ensuring the participation of the people in a framework of dialogue, and encouraging plurality of information.

The tasks consist mainly in the drafting of organic laws and regulatory texts dealing with:

  • - public freedoms namely of opinion, expression and assembly

  • - Funding of political parties and election campaigns

  • - having an opposition

  • - revision of the election code in collaboration with the national elections committee (CNE), observers’ associations and NGOs

  • - charter of civic education. The national elections committee (CNE) will play the major role in voter education as moral guarantor of the authenticity and accuracy of the vote count

  • - building the capacity of CNE

  • - support and the reinforcement of the capacity of civil society by providing it with adequate resources

The structures to be set up are:

  • - A national observatory of democracy

  • - A platform for dialogue and expression

Outcomes expected regarding respect for democracy

  • - Citizens informed of their rights and duties

  • - Reliable electoral rolls

  • - Candidates treated in an egalitarian manner

5.1.3 Governance and rule of law

Regarding restoration of the rule of law, the Government is committed to instituting sound impartial justice that respects human rights and provides security for investments. Therefore those in power, like all citizens, are treated equally under the law, and any kind of impunity at any level is eliminated. It is also committed to: (i) protecting the independence of the judiciary, (ii) guaranteeing attorneys freedom of action, (iii) depoliticizing the civil service, (iv) increasing the scope of the judiciary’s power and extending it to all through impartial and independent authorities, (v) enforcing and ensuring compliance with the existing laws and regulations. The government sees systematic penalties for acts of corruption as one of the measures for returning morality to public life.

Increasing the number and effective use of spaces designed for economic and social dialogue, and bringing the courts closer to the people they serve are integral parts of its effort to establish good governance.

In addition, the Government will take some measures to establish an environment where the security of the people, of their property, and their production activities in the country will be ensured, a climate favorable to the promotion of fast and sustainable economic, social, political, and cultural development.

5.1.3.1 The justice system

In the justice system, a series of measures will be implemented to strengthen the system and improve the functioning of these services, based on the following five points:

  • - Rehabilitating the functions and infrastructure of the judiciary and penitentiaries throughout the country

  • - strengthening the anti-corruption system

  • - accelerating the processing of cases

  • - improving the legal environment, especially for the economy

  • - humanizing incarceration

5.1.3.1.1 Rehabilitate the judicial system infrastructures throughout the country

Actions will be related to:

  • - setting up the structures provided for in the Constitution, i.e. the Supreme Court with the Supreme Court of Appeal [Cour de Cassation], the Council of State, and the Audit Office, the National Council of Justice and the High Court of Justice. This will be effective by the end of 2005;

  • - construction of new buildings: a new building for the Ministry of Justice and a complex for the Supreme Court, the Audit Office, the Council of State and the High Court of Justice;

  • - continuation of deconcentration of the courts by the construction of courts of appeal;

  • - creation of two or three courts of first instance per year and the activation of administrative and financial tribunals;

  • - modernization of the working tools of the central authorities of the Ministry of Justice by providing the means for rapid communication with all the jurisdictions;

  • - development of human resources by improving the quality of the initial training and of the professional development of staff and magistrates.

5.1.3.1.2 Strengthen the anti-corruption system

Actions to be taken are: (i) to focus efforts mainly on containing or deterring corruption in the justice system, while severely repressing proven cases of as corruption, (ii) to educate the population in order to sensitize it to participate in this important effort which requires its involvement

  • Prevention

  • - carry out a survey on the usefulness of instituting a corruption observatory. This observatory would be responsible for: (i) reviewing each stage of the process to determine which are the most at risk, (ii) analyzing the causes and effects of corruption, (iii) proposing reforms aimed at eradicating corruption in the sector. International technical assistance may be envisaged to this end;

  • - ensure transparency of judicial decisions and unification of jurisprudence by publishing all the decisions handed down by the Supreme Court and the courts of appeal, the comments made by jurists and academics. The media will contribute to improving such transparency and to the coherence of case law;

  • - improve the working conditions with motivated personnel, appropriate and sufficient resources, well-established standards of work in the organization of a jurisdiction and in the time needed for processing cases;

  • - plan regular inspections in the jurisdictions, conducted by various bodies, notably the Directorate of the Supervision of the functioning of the jurisdictions and penitentiaries, the General Inspectorate of Justice, the supervisory section of the Supreme Court, monitoring heads of courts and jurisdictions. This year, the Directorate supervising the functioning of the jurisdictions envisages going on inspection tours to the 24 jurisdictions;

  • - encourage the reporting of acts of corruption. The complaints book opened in the jurisdictions and in the prisons will be maintained and used. Ordinary citizens’ complaints will be checked and investigated. Inquiries into complaints are coupled, as far as possible, with the inspections of the jurisdictions;

  • - ensure respect for the ethical and professional rules governing the magistrates by designing a genuine code of ethics and professional conduct, which includes sanctions.

  • Repression

  • - adopt an anti-corruption law;

  • - prosecute before the disciplinary council of authors of corrupt practices;

  • - sue perpetrators of corruption without discrimination and in openly.

  • Education of population:

  • - draft all verdicts and judgments in Malagasy by 2006;

  • - educate and inform the population about justice: hold public information sessions, which might be general or targeted;

  • - create support for information and dissemination of the rights and duties of the citizen;

  • - train facilitators, trainers, and coaches on the ground;

  • - facilitate access to courts and offices by putting up signs in offices, a map of the court at the entrance, indicating the names of units on the doors, and posting of official rates in clerks’ offices, in bailiffs’ offices and in notaries’ offices;

  • - develop an anti-corruption culture by raising public awareness of the damage due to corruption especially in the justice system. The anti-corruption campaign cannot be successful without the support of the public;

  • - make the administrative and financial jurisdictions operational: the establishment of administrative and financial tribunals in every provincial capital and an Audit Office in the national capital will enable these controls on action to be effective and the budget for local government authorities to be decentralized;

  • - inform all persons subject to trial of alternative dispute settlement options, such as institutional or civil mediation;

  • - facilitate the provision of legal assistance.

5.1.3.1.3 Expedite the processing of cases:

Action to be taken in this area:

  • - develop the monitoring and control of the activities of the jurisdictions by examining documents periodically prepared by the jurisdictions;

  • - increase the number of hearings by organizing several ordinary criminal court sessions as well as sessions of special criminal court and circuit court hearings;

  • - improve working relations and methods between the various persons involved in an action, namely the systematic communication of the decisions to the police or the Gendarmerie;

  • - make legislative reforms in order to shorten the duration of detention pending trial and speed up civil trials;

  • - computerize departments in the jurisdictions.

5.1.3.1.4 Improve the legal environment for business and social (labor) rights:

Actions to be taken are:

  • - continue the installation of Trade and Company Registers (RCS), notably in high-activity regions;

  • - set up the RCS coordination committee;

  • - adopt the draft Business Law as it pertains to commercial companies, the collective procedures for checking liabilities, goodwill, guarantees;

  • - reactivate the business law reform commission.

5.1.3.1.5 Humanize incarceration

Actions to be taken are:

  • - Increase penitentiary administration staff: (publication of statutory instruments of Law No 95- 010 of July 15, 1995 on the status of the personnel)

  • - improve the infrastructures detention facilities by transferring the Antanimora central prison to Anjanamasina, separate those in preventive detention from convicts, adults from minors; rehabilitate the Anjanamasina Re-education Center. Register the plots of land allocated to DAPES;

  • - implement an action plan to combat malnutrition by increasing food rations, sanitation facilities in the prisons to meet hygiene standards, installing infirmaries in all prisons, systematic doctors’ visits and medical care, care for the young children of prisoners, and specific actions for fighting against STDs and AIDS;

  • - modernize penitentiary services through a computerized management of the locations where prisoners are held;

  • - reinforce the security of detention centers by the acquisition of new equipment for armament and ammunition, as well as by the acquisition of communication systems, and by the construction of enclosing walls for the penitentiaries, and stronger measures for dangerous prisoners (Tsiafahy);

  • - strengthen control over penitentiaries: program of tours and oversight controls of prison establishments with regard to, inter alia, arbitrary detention, hospitalization of prisoners, etc.;

  • - facilitate social reinsertion by increasing the number of occupational training workshops, literacy and primary education, as well as farming or fishing in the coastal regions, creation of penitentiary villages, raising public awareness;

  • - reactivate parole.

5.1.3.2 Security

To ensure the security of individuals, their property and production activities in rural as well as urban areas, the Government has entrusted the introduction and implementation of this ongoing policy of combating insecurity in all its forms to two ministerial departments, Public Security and National Defense. The Ministry of the Interior is the main agency responsible for civil protection.

The main actions concerning civil security and protection consist in:

Reinforcing security in urban areas by:

  • - strengthening security by the “local and surveillance police” system, adapted to the local communities, in 60 major towns in Madagascar;

  • - reinforcing the operating capacity of the units in charge of the Criminal Investigation Department throughout the country, to handle the maintenance of law and order, regulation of urban traffic, violence, drugs, HIV/AIDS, natural disasters (cyclones, floods, fires);

  • - building the operational capacity of the units in charge of judicial police to deal with organized crime, terrorism and kidnappings;

  • - building the operational capacity of the units responsible for prevention in the fight against corruption and financial and economic delinquency throughout the country;

  • - reinforcing the airport and port safety and marine and coastal surveillance (PNSA-PSMC). Program carried out by the national police jointly with the national Gendarmerie, civil security, and other entities involved in prevention, regular measures emergency measures in the event of a crisis (natural disasters, hostage taking, bomb scares, plain crashes and highjackings, epidemics, fires, and marine pollution, etc);

  • - reinforcing the capacity to steer, coordinate, monitor/evaluate, and regulate the DNSP to institute law and order, ensure good governance, and guarantee the security of the population’s productive and economic activities with a view to fast and sustainable development.

Reinforce the national police corps providing appropriate training by:

  • - improving the system of initial and further training of the National Police corps, aiming at balancing employment-recruitment-training;

  • - equipping the schools with appropriate educational supplies.

Provide the national police with modern infrastructure and equipment by:

  • - building the operating capacity of the units in charge of transmission and processing of data on professional activities;

  • - providing new modern equipment for maintaining order and apparel (appropriate uniforms);

  • - reinforcing the infrastructure for the strategic steering, coordination, monitoring/evaluation and regulatory units of the DNSP and for the tactical and operational units.

Civil protection by:

  • - setting up a national civil protection system;

  • - rationalizing disaster risk management (cyclones, floods...) by implementing and activating the disaster relief organization ORSEC, in conjunction with interventions by all the entities involved;

  • - strengthening civil security (monitoring the movement of persons, …);

  • - setting up a department in charge of training and education;

  • - setting up all the civil protection units in 2004.

Ensuring rural security by:

  • - extending security-keeping intervention to other cases of theft (except zebus): theft of crops, particularly vanilla, theft of mining and fishing resources;

  • - standardizing the traditional safeguard system (“dina”), for which participative workshops were organized in the six provinces, followed by a consolidation workshop;

  • - establishing local security, by maintaining an almost permanent presence in the population to prevent rather than repress crime, and the Local Security Plan (PLS), which represents all the actions to be conducted or carried out to meet the needs expressed by the population;

  • - awareness and accountability of the fokonolona by reinforcing the operational capacity of the units in charge of the judicial police and rural security;

  • - carrying out frequent security operations.

The following stations will therefore be instituted:

  • - advanced, brigade-like stations in the communes;

  • - fixed stations, for surveillance missions at a given observation point (e.g. on “kizo” duty during a lunar cycle)

  • - shifting stations, for very specific missions, limited in space and time (e.g. surveillance of major roadways).

In areas reputed to be insecure, “Autonomous Security Detachments” (DAS) are set up to complement the Gendarmerie’s actions in preventing crime and reducing the length of time needed to contain the problem.

Surveillance of the coastline and border control will be ensured by:

  • - creating sea and air patrols

  • - placing canine brigades at international airports.

Expected outcomes in terms of security:

  • - criminality rate, reduced

  • - places, maximum security

  • - actions, rapid and efficient

5.1.4 Local governance

The Government believes that the goals of fast and sustainable social, political, and economic development can be easily attained if the population becomes more accountable and the best local government management practices are used. Therefore the implementation of genuine decentralization provides an anchor and sense of ownership of development for the grassroots population. It will be accompanied by suitable deconcentration, respectful of the values of traditional “fokonolona” society.

Within this context, the Government has initiated the deconcentration/decentralization of decision-making and management powers, which will make the actors of development more responsible and enable policies to be made at the population base.

The deconcentration/decentralization of the services makes it possible to develop quality local services. Budget management will be rationalized in order to ensure better resource allocation between operating and personnel costs and the actual allotments to deconcentrated services as operational structures.

The new units of the autonomous provinces will be fully responsible for local actions, which are in great demand for the poor. These agencies will be in a position to collaborate with public- or nonpublic-sector executing agencies to prevent useless administrative duplications. They should receive the necessary support to correctly respond to the demands of the poor, which will help establish the credibility of these new local political institutions.

The resulting transfers of know-how will be particularly important in the fields of education, health, rural development and infrastructures, and will consolidate and institutionalize the systems that are already in place.

Thus, the main objective being ’to bring the Government closer to the people through decentralization and deconcentration’, five key actions will contribute to its implementation, namely:

  • - creating a favorable context for the economic and social development of the communes,

  • - building the institutional capacity of the communities,

  • - enhancing the financial autonomy of the communes,

  • - making the Communes more responsible for the management of health and education services,

  • - reinforcing the intervention capacity (support and control) at the central level.

5.1.4.1 Create an environment conducive to the economic and social development of the communes

This entails developing an institutional, socioeconomic and organizational framework allowing the communes, as basic community units in the autonomous provinces, to fully assume their role as agents of development, serving their population by supplying satisfactory goods and services locally. It is also a question of preventing efforts from being dissipated and coordinating their actions in the field.

Activities to be carried out consist of:

  • - making existing texts coherent;

  • - promoting satisfactory local services: drinking water, electricity, rural roads, vital statistics, sanitation, public markets, and libraries;

  • - harmonizing intervention by the support agencies: ANAE, FID, PSDR, PAICAL, PAGU, etc.;

  • - developing inter-communal cooperation: management of inter-communal infrastructures;

  • - developing decentralized cooperation: partnership for development;

  • - implementing incentives to attract private investors and support local initiatives (through decentralized cooperation): land use planning subsidy for the poorer communes and regions;

  • - making ministerial departments aware of the need to create local public utilities (deconcentration);

  • - fostering incentives to attract private investors and support local initiatives.

5.1.4.2 Build institutional capacity at the community level:

Measures involve continued implementation of the different structures in the autonomous provinces, such as the special solidarity funds, the economic and social council, etc., ensuring that they are operational, and supporting them in preparing the tools for their development (provincial and regional development scheme) and for monitoring and supervision.

Actions to be taken are:

  • - continuing to set up structures create structures in the autonomous provinces: special solidarity funds, economic and social council, inter-provincial conference, regions, etc.;

  • - supporting the drafting, implementation and monitoring/evaluation of the regional and local development schemes;

  • - supporting the autonomous provinces in the identification of regional poles of development;

  • - implementing a dissemination system.

5.1.4.3 Improve the financial autonomy of the communes

Financial autonomy is a decisive factor in decentralization allowing the communes adequate financial resources to develop quality public services. Therefore, training the communal authorities and improving of the tax system (drawing up tax rolls, collection, and monitoring) will be done with the help of the tax administration to ensure that the Government’s fiscal efforts are oriented towards investment.

Measures to be taken are:

  • - harmonizing and rationalizing the Government’s fiscal efforts and the financial interventions of development partner agencies;

  • - improving the fiscal/quasi-fiscal resources of the communes;

  • - ensuring widespread application of the system of autonomous collection of tax and other resources by the communes;

  • - encouraging communities (national and/or international) to share their experiences;

  • - defining programs and promoting training for commune officials;

  • - improving the system of monitoring the communes and ensuring its effectiveness.

5.1.4.4 Make the communes more responsible for the management of health and education services

Support specific to health and education will be developed, in order to give the communes more responsibility for the management and functioning of the health and education systems.

In addition, it means clarifying the responsibilities and roles of the various actors, promoting quality services and developing monitoring tools (files, reports, annual performance reports).

Actions to be taken are:

  • - promoting satisfactory local health and education services;

  • - revising the organizational chart of communal services (see decentralization pilot projects);

  • - inventorying the number and location of Basic Health facilities and Public Primary Schools (CSB/EPP);

  • - requiring the communes to produce periodical reports on the enrollment of children under 14 and the health status of the population;

  • - clarifying the roles and functions of the communes regarding health and education;

  • - monitoring and supervising the management of allocated resources;

  • - producing newsletters (Mayor’s letter).

5.1.4.5 Build intervention capacity (support and supervision) at the central level

Several actions are planned, including:

  • - strengthening and redeploying personnel and resources at the central and regional levels;

  • - organizing training and study tours to countries with great experience in decentralization;

  • - creating a documentation center and a website;

  • - reducing the incidence of under-administration by strengthening the capacity of heads of administrative and territorial divisions;

  • - modernizing government.

Main outcomes expected

  • - 60 communes will have a minimum level of operational services in 2003, 120 percent in 2004 and 140 percent in 2005;

  • - increased number of communes managing health and education: 60 in 2003, 120 in 2004 and 300 in 2005;

  • - 10 communes will have adequate resources in 2003, 20 in 2004 and 50 in 2005;

  • - effective government presence throughout the national territory.

5.2 PROGRAMS DESIGNED TO ATTAIN THE OBJECTIVES OF STRATEGIC FOCUS NO. 2

To improve the performance of the economy, Madagascar must the appropriate instruments to implement measures conducive to the realization of the objectives of sustainable growth and maintaining key balances.

5.2.1 Macroeconomic stability and growth

The economic and financial policy of Madagascar is designed to preserve macroeconomic stability. Internal equilibrium would be restored by reducing the public deficit, which would affect domestic demand by keeping its growth within limits compatible with inflation reduction objectives. The resulting gain in competitiveness doubled by the effect of promoting dynamic sectors would contribute to the reduction of external deficit, the maintenance of a viable balance of payments and the improvement of the overall situation of external payments.

5.2.1.1 Macroeconomic policy
5.2.1.1.1 Effective tax and fiscal policies

Great efforts will be made to reach public deficit objectives; (i) improvement of tax collection to raise the tax ratio to international standards, (ii) optimum expenditure control and programming, in conformity with global and sectoral objectives.

The Government will continue with the actions it has initiated for improving tax revenue, etc., deconcentration and computerization of tax offices, and awarding of government contracts, securitization of customs revenue by developing local customs offices, effective action by the company in charge of declared customs value and computerization of units using ASYCUDA++ software.

The joint arrangements governing regional cooperation are causing capital losses in external receipts. In addition, the policy of opening up requires an increasingly less functional tax system. The Government therefore must rely on the domestic tax system by extending the system of composite taxes to all activities not subject to corporate income tax and by intensifying the collection on nontax claims (counter value funds, subsidies, dividends, cash advances).

Improvements in governance through the anti-corruption system and the reform of the supervisory agencies should help bolster the quality and effectiveness of public expenditure. According to government guidelines, the latter will be allocated largely to infrastructure, social spending, and security. The budget as well as related instructions to appropriation managers will be established in time. The Government will implement the regulatory arrangements arising from the redrafted texts governing the supervisory agencies, particularly as regards government procurement contracts, supervision and monitoring of the implementation of each stage of the budget chain (commitment, verification, payment authorization, payment). It will oversee the establishment of an updated database for managing civil servants and will ensure that adequate counterpart funds are available to effectively benefit from international project financing.

5.2.1.1.2 Prudent monetary and financial policy

Monetary policy aims to control inflation while ensuring that there is adequate financing for economic activities. The rates policy will be continued to supply the banks with central bank money. The training mechanism will take into account anticipated and observed inflation. The monetary authorities will change the required reserve ratios as the economic and financial situation changes and will intervene on market terms in auctions to mop up or inject liquidity. The penalty system will be maintained for noncompliance with reserve requirements.

The floating exchange regime will be maintained to enable the economy to become internationally competitive thereby ensuring the viability of the balance of payments. The central bank will intervene in the interbank foreign exchange market only to achieve foreign reserve objectives and prevent major fluctuations in the Malagasy franc. There are also plans to set up an ongoing exchange market. Incentives are being offered to increase the number of exchange bureaus to ensure full competition.

Concerning the external debt, Madagascar will strengthen its partnership with the donors and will honor its international commitments in order to benefit external debt relief, which will allow the release of additional resources to finance development programs. Only concessional borrowing will be undertaken. Negotiations to restructure and cancel external debt will be pursued. Important efforts will be made to mobilize external funds in accordance with the Government’s development objectives and economic policy. Regarding external debt management, the DMFAS system will become operational.

5.2.1.2 Drafting a long-term development strategy and medium-term macroeconomic frameworks and estimates

For the period 2003 to 2006, the Government will focus its efforts on the following actions: (i) preparing long-term development guidelines; (ii) taking inventory and plotting a map showing the spatial/sectoral distribution of projects and resources; (iii) defining and coordinating sectoral policies; (iv) defining a public investment policy consistent with the strategy for alleviating poverty; (v) building the institutional capacity of the institutions responsible for economic management by establishing the Center for Research, Surveys and Support to Economic Analysis in Madagascar (CREAM); (vi) drafting of the National Monitoring-Evaluation Policy (PNSE); (vii) monitoring and coordinating the implementation of programs of cooperation and integration in the world economy, placing special emphasis on regional integration; (viii) drafting and monitoring implementation of the action plans set out in the PRSP; (ix) coordinating and providing technical support for designing regional as well as local plans; (x) developing a database on Official Development Assistance and private funding; (xi) short-term economic forecasting; (xii) developing and fine-tuning macroeconomic and sectoral models; (xiii) updating data on macroeconomic performance; (xiv) carrying out and monitoring commitments made at the Friends of Madagascar Conference; and (xv) implementing the safety net program provided for in the Emergency Economic Recovery Credit (CURE).

These actions will make an economic growth rate of 8 to 10 percent on average and an investment rate of 20 percent possible by 2006

5.2.1.3 Updating and implementation of the privatization program

The privatization program has reached a point of no turning back. The measures envisaged will be continued but with the introduction of a few adjustments to the present social context, so that the measures taken might contribute more effectively to attaining the objectives.

The actions consist in: (i) inventorying and updating the assessment of enterprises earmarked for state divestiture and preparing an implementation schedule; (ii) completing the process for the enterprises being privatized; (iii) applying accompanying measures by standardizing social plans; (iv) using piggy-back financing to create a stock exchange and develop domestic shareholders; (v) monitoring the companies in which the Government has interests; (vi) updating implementation of the privatization program, ensuring better good management of change and of the impact of privatization.

5.2.2 emergence and revitalization of regional development poles

Economic recovery will be faster by drawing mostly on the regions with strong growth potential, through revitalization of the private sector and development of the leading sectors.

A strategy for emergence and revitalization of development poles will be implemented to materialize and bring together all development policies and programs.

The following objectives can then be achieved:

  • - from an economic point of view: regional integration through intensification of local economic and social exchanges between towns and the countryside, and through the spread of economic development brought about by the extension of the exchange zones to the neighboring territories, which will be gradually revitalized through the initial strengthening of the main leading poles;

  • - from the population and urbanization point of view: increased geographic mobility of people, who are expected to establish more concentrated human settlements;

  • - in terms of effective public and private investments: optimal their social and economic yield, which is largely linked to the concentration of human settlements;

  • - from the point of view of national unity: stronger economic, social and cultural exchanges between the regions that support national economic integration, and population mixing.

To achieve this, the following will be developed:

  • - a policy to support the private sector, particularly to encourage it to invest in the regional development poles;

  • - a policy to promote and support the leading growth sectors and regional and intersectoral integration;

  • - a policy on the regional level to harness the growth effects of international trade through dynamic and voluntary integration into the world economy;

  • - a policy of integrated rural development;

  • - an increase in structuring infrastructure organized around a policy that is adapted to land development.

5.2.3 Development and revitalization of the private sector

Madagascar has a frame of reference for developing and revitalizing through the National Private Sector Support Program (PNASP). The program’s growth objectives will be reflected in major investment efforts not only in terms of volume but also in terms of productivity. As the private sector is the engine of economic growth, two key factors influence its investment, namely a framework that provides greater incentives and security and adequate infrastructure. The private sector will be developed within the framework of good public/private partnership (PPP) synergy and the establishment of economic development poles.

The actions of the Government will therefore seek effective public investment and incentives to foreign and national private investment. The need to integrate trade policy in all development policies has been stressed with regard to various initiatives, including the Integrated Framework set up by the Ministers of Trade of the World Trade Organization (WTO) for the benefit of the least developed countries (LLDCs) and approved at the conference of ministers in Doha in November 2001. Madagascar was the subject of a pilot study in the context of a program aimed mainly at integration in the world market as a poverty reduction strategy.

Apart from establishing a sound macroeconomic framework, the following measures will have to be implemented:

  • - improvement of the business environment and institutional framework;

  • - restructuring and capacity building;

  • - setting up an appropriate technology and information system;

  • - promotion of direct, foreign and/or national investments;

  • - export promotion;

  • - definition of a clear land tenure policy.

5.2.3.1 Improvement of the business environment and institutional framework

The main objective is the development of the private sector. To achieve this, the legal, statutory and judicial support system must be strengthened in order to create a safe and attractive environment

Actions to be taken include: (i) identification, consistency and dissemination of the regulatory and legal provisions on business law (tax system, immigration, exports, land tenure...) in accordance with the regional or international agreements to which Madagascar is a signatory; (ii) reinforcement of bilateral agreements for the protection and promotion of investments; (iii) restructuring and reactivation of the Chamber of Commerce, Industry and Agriculture (CCIA) and the Trade Council; (iv) setup of the One Stop Shop for Investment, and Enterprise Development (GUIDE) aimed at facilitating and alleviating the formal administrative procedures for establishing, investing in, and operating a investment (bureaucratic red tape, tax system, licensing; etc.); (v) establishment of strategic oversight with a view to improving the main domestic production costs; (vi) drafting and adoption of regulatory instruments governing savings and loan cooperatives; (vii) facilitation of access to land ownership; (viii) setup of new financial instruments for households and enterprises; (ix) overhaul of the free zone regime, emphasizing the reduction of red tape; (x) drafting of an Investment Charter including promotion of partnerships, incentive measures, social planning, and minimal contributions of capital; (xi) improved texts on intellectual property and (xii) creation of a Small and Micro-Enterprise Office (OMPE); (xiii) increase in the number of cottage industry zones; and (xiv) revival of the cooperative movement.

The implementation of these measures will build confidence among economic operators and will develop business relations conducive to national as well as foreign investment.

5.2.3.2 Structuring and capacity building

Capacity building is very important and thus it is essential to devote substantial effort and resources to it if tangible results are to be obtained for economic operators under a medium- and long-term program.

The actions and measures to be taken are as follows: (i) implement an operating structure, decentralize and strengthen the Enterprise Steering Support Committee (CAPE), which is the key platform for action and dialogue between the Government and the private sector; (ii) implement a program to upgrade enterprises and continue the activities of the CNFTP; (iii) promote economic interest groups; (iv) enhance the quality and the intake capacity of occupational training centers and set up local training centers; (v) implement identification and inventory proceedings (for example communes with the potential to exploit opportunities, sectoral specialization); (vi) implement support and assistance for projects to create and/or develop export-oriented units and to organize and structure branches of industry; (vii) build the capacity of government operators with a view to effective participation in the activities and work of multilateral and regional organizations (COMESA, ACP/UE, OMC).

All these measures will improve the managerial capacities of operators and match training to jobs.

5.2.3.3 Implementation of a technology and information system

Information allows the evaluation of the functioning and the development of the economic environment. The main objective is to improve the collection, the analysis and the spreading of the information so that public and private sector companies are fully conscious and informed of commerce and investment opportunities.

To reach these objectives, actions to be taken are: (i) reinforcement and decentralization of the BIPE in order to build confidence between the private sector and the government for the sake of transparency and to improve accounting information and better orient government economic policy as an information base for identifying economic opportunities and investment niches to be given priority; (ii) improved communications and strengthening of the information system that serves foreign trade; (iii) rehabilitation of the WTO Reference Center; (iv) grouping in a single center systems for job training and corporate information and technology; (v) monitoring of information on world productivity standards; (vi) strengthening of the quality approach (Madagascar label, traceability, etc.), establishment and strengthening of the national standards bureau, as well as adoption of national standards for all products; (vii) setup of a facilitation framework for transfers of techniques and know how; (viii) enforcement of the regulatory instruments of the law on the management and control of industrial pollution; (ix) drafting of the ICT national policy and legislative framework.

Implementation of all these measures will lead to a flexible, progressive, viable and reliable information system.

5.2.3.4 National and/or foreign direct investment promotion

To attract foreign investment and to encourage domestic investment, Madagascar has set up a number of programs whose main objectives are to enhance country’s image and simplify procedures.

To attain these objectives, the main actions will be to: (i) create a free trade zone corridor; (ii) draft an investment promotion strategy; (iii) develop dedicated industrial zones; (iv) support the creation of a platform for exchanges among foreign and national operators; (v) renegotiate the use of the guarantee fund to better respond to the needs of enterprises; (vi) effectively implement the piggyback funds system; (vii) set up a system for financing MSMEs and incentives for formalizing the informal sector; (viii) implement measures that provide incentives for and attract subcontracting and partnerships; (ix) define and implement the development of a strategy for local production of inputs; (xii) promote decentralized cooperation....

The main impacts of these measures will be a reduction in the processing time for cases and promoting partnerships.

5.2.3.5 Export Promotion

In this area, the general policy is to develop economic and commercial relations within the framework of globalization.

In this case, the actions to be taken are: (i) setup of permanent showcases of exportable products establishments like the Maisons de Madagascar and the Chambers of Commerce, Industry and Agriculture (CCIA); (ii) integration of E-trade and websites in the BIPE and support for the organization of and participation in international economic events; (iii) the strengthening and revitalization of the roles of trade attachés and advisors, with the appropriate profiles, with a view to setting up economic growth offices; (iv) organization of the awareness and outreach campaign for the African Trade Insurance Agency (ATI/ACA) agreement.

The main performance indicator in this area is the increase in volume and value of exports.

5.2.3.6 Secure land ownership

Actions will cover: (i) definition of a clear transparent land policy by implementing a national program to establish land rights and determine ownership (ODOC, collective registration), including the modernization of land conservation of land conservation, (ii) definition of the practical procedures for domestic management of private domain by local communities, and the effectiveness of granting long leases, (iii) building the capacity of land tenure circuit courts.

As the land tenure problem is a sensitive issue for the population, decision-making in this area might require the organization of a national conference, especially as regards access to land ownership for nationals and foreigners.

5.2.4 Development of growth sectors

There are five growth sectors: tourism, mining, fisheries and aquaculture, export-oriented manufacturing industries and other manufacturing industries, small and micro enterprises.

5.2.4.1 Tourism

The tourism potential of the Island remains quite largely under-exploited. The wealth of the Malagasy fauna and flora, the biological diversity characterized by the thousands of endemic species make of Madagascar an attractive destination for tourists. Despite the country’s enormous tourism potential, flows of arriving tourists changed only by about 10 percent per year in the last decade. Furthermore, the crisis has affected the tourism sector to a large extent and tour operators find themselves at present in a critical situation. The decline in activity in the sector was estimated at 80 percent and the impact was reflected, inter alia, in the closure of agencies, mass cancellations of bookings, layoffs, non-payment of tourism taxes, and in the destination not being recommended by foreign operators.

In other words, the country needs appropriate measures and a number of specific actions involving the Government, private tour operators and bi- and multilateral partners for the immediate recovery of tourism activities.

Using that approach, the objectives will be:

  • - to promote tourism and ecotourism development, which protects and preserves the natural environment and the sociocultural identity of Malagasies,

  • - to make tourism an instrument of sustainable development that directly benefits village communities,

  • - to improve and increase tourism revenue for all sector operators.

Possible new guidelines include:

  • - Revival of tourism activities through basic facilitation: removal of the visa requirement for some countries, to enable public as well as private agents to resume all the country’s tourism activities as rapidly as possible.

  • - Opening up the air space in terms of competitive rates based on transparent regulations is also necessary.

  • - Promotion of Madagascar as a destination for the private sector by setting up a permanent and sustainable plan which will act as an interface between the Ministry of Tourism and operators.

  • - Enhancement and support for the development of infrastructure and the creation of incentives to investors in the sector: creation of Tourism Land Reserves (RFT) through an appropriate distribution of the sites, creation of the National Office in charge of managing the RFTs, alleviation of existing procedures to facilitate investment, and redrafting of the Tourism Code.

  • - Rehabilitation of tourism tax sticker by amending laws governing this quasi-fiscal tax both as regards the collection procedures and the use of receipts.

  • - Availability of mechanisms relating to the specific financing of the tourism sector to facilitate access to credit especially for small and medium-sized investors.

  • - Modernization and development of permanent structures for hotel and tourism capacity building: training in tourism-related occupations.

  • - Combating sex tourism and drug trafficking in the main tourist areas in collaboration with the other ministerial departments concerned.

The impact and results below are expected within the period 2003-2006:

  • - creation of 900 to 1,500 additional rooms;

  • - demarcation of tourism zones and constitution of tourism land reserves;

  • - increased tourist arrivals after the revival of the sector;

  • - setting up of Tourism Offices.

5.2.4.2 Mining

Given its geological makeup, Madagascar has significant mining potential, which s not well known and scarcely exploited. The contribution of the sector to the country’s economic and social development remains minimal. The recent discoveries of precious stone deposits and the systematic rush it caused requires a specific strategy and a strict integrated management of those non renewable resources at the mining and processing levels, to maximize their value-added.

The Government has started to standardize small mining ventures in recent years by designing an integrated management plan for non-industrial small mines. In addition, a number of didactic instruction manuals for small holders, as well as an information and environmental management system have been designed. The legal framework has also been set up by drafting legal and regulatory texts (mining policy, mining code, law on large mining investments, statutes and organization of the National Mining Council ...).

The objective is to increase the contribution of the mining sector to the national economy. The mining of titanium sands and of nickel and cobalt might in time, multiply the contribution of the mining sector tenfold.

The Government’s strategic actions, to better develop potential, will consist in (i) setting up a transparent mining system, (ii) promoting large mining investments and decentralized management of mining resources, and (iii) eradicating fraud in the mining sector.

In order to attain these objectives, the program of action will focus on:

  • - consolidation and reinforcement of the central mining administration;

  • - control of production and the operation of a system for collecting data on usable resources, economic deposits in mines, mapping of mining development sites;

  • - extension of the system for monitoring and control of mining activity;

  • - incentives to private operators to invest in the mining industry;

  • - control of the legal, judicial and financial framework for related fields and mining affairs, and relating to the sub-soil;

  • - strict application of environmental resource replenishment and conservation;

  • - increase in the capacity for controlling and monitoring mining activities;

  • - security for investors;

  • - promotion of and support to the private sector;

  • - enhancement of the value of Malagasy products;

  • - stabilization of informal sector traffic in minerals;

  • - creation of research and development structures;

  • - differentiation between regulations governing raw mines and worked mines.

The main impact and outcomes expected from the mining sector in the period 2003-2006 are the following:

  • - increase in reported production of precious stones by legally established non-industrial miners from USD 20 million in 2002 to USD 33 million in 2006;

  • - increase in the per capita income of the populations in the non-industrial mining districts from a base index of 100 in 2002 to 120 in 2006;

  • - increase in the collection of mining royalties, using collection mechanisms, from 10 percent in 2002 to 56 percent in 2006;

  • - increase in the value of yearly exports of gold and precious stones from USD 21 million in 2002 to USD 40 million in 2006;

  • - increase in the yearly value of investments in the mining sector from USD 10 million in 2002 to USD 60 million in 2006.

5.2.4.3 Fishing and fish farming

Implemented since 2000, the new system of non-discretionary, competitive, transparent management of shrimp farming licenses has helped to improve the performance of this subsector and enhance the economic gains for the country, including higher tax and nontax revenue for the Government. Between 1999 and 2000, export revenue increased by 19.3 percent 35 and government revenue from fisheries by 29.5 percent. The recently implemented tools to assist in decision-making, namely the economic observatory and the bio-economic simulation model for fisheries, will be fully exploited.

The Government will propose zones conducive to shrimp farming to investors, while ensuring strict environmental and health (epidemic supervision) monitoring at the same time. Within this framework, in conjunction with professionals, it will amend (law on aquaculture) or will publish (in the area of health) the necessary regulatory texts. The possibility of developing controlled artisanal fish farming will be explored.

The perspectives of developing maritime fisheries will be explored using a program for assessing fisheries resources in Madagascar, with a view to introducing sustainable, responsible and transparent management of each resource. In this context, a special effort will be made to bring about the appropriate and sustainable solutions to traditional fisheries and to coastal communities that depend on the use of marine resources.

At the same time, the promotion of inland fishing will bring extra sources of incomes to the population through capacity building actions.

To promote fish farming, farmers will be targeted for sensitization in collaboration with NGOs and projects; species suitable for farming will be diversified and the production capacity of operators strengthened.

Where possible, in order to implement the principles of transparency, partnership with private sector, and accountability, joint management arrangements will be sought, which incorporate all the partners involved in exploiting the resource.

With a view to preserving market access and providing the health guarantees necessary to protect consumers and to meet the demands of importing countries (EU), the government will provide the necessary facilities for the financial autonomy and independence of the competent health authority, the Directorate of Veterinary Services (DSV)

The expected main impact and results for the fishing and fish farming sector are the following:

  • - increase of the products for export (shrimps, crabs, lobsters ...) from 28,872 metric tons in 2000 to 36,700 metric tons in 2005, valued at FMG 850.163 billion in 2000 and FMG 1,310.153 billion in 2005;

  • - total production in fishing and fish farming for local consumption of 120,000 metric tons in 2005;

  • - increase of local fish consumption to 8 kg per capita per year in 2005;

  • - increase in job creation from 47,600 in 2000 to 70,500 in 2005 (formal and informal sectors).

5.2.4.4 Export-oriented manufacturing industry

During the last ten years, Malagasy exports have more than doubled in value. This performance can be explained by the appearance new types of goods, coming essentially from the free zones, to the detriment of traditional products such as vanilla, coffee and cloves.

Created in 1989, the free zone had nearly 162 enterprises in operation by the end of 2001, employing over 72,000 people and covering several areas of activity from garment making to information processing. In the current FMG, its contribution to GDP was about 2.9 percent in 2000 and clothing items alone accounted for a little less than 40 percent of all Malagasy exports. Almost 80 percent of foreign investments are attracted to this sector due to Madagascar eligibility for the Africa Growth and Opportunity Act (AGOA).

Its prospects for rapid growth and expansion in light of the country’s assets made and make the free zone an important growth pole. It will also have a spin-off effect on the development of other manufacturing industries.

Although the sector felt the full impact of the crisis during the first six months of 2002 the objective is to attract more foreign direct investments, increase the number of direct jobs, expand exports and encourage integration of the productive system.

To that end, the action plan will be geared towards:

  • - the establishment of an administrative coordination bureau for the activities of the free zones,

  • - vertical integration and anchoring of the textile sector by the improvement of cotton growing and setting up spinning and weaving plants,

  • - intensified diversification of the activities of export enterprises in general and free-zone enterprises in particular serving other sectors (jewellery, NICT, assembly, ...).

  • - strengthening sub-contracting by taking legal measures,

  • - continued tax incentives.

The main outcomes expected in this sector are an increase of goods flows, increased job creation, and enhanced competitiveness of Malagasy companies.

5.2.4.5 Other manufacturing industries, small and micro enterprises

Madagascar’s industrial apparatus (free-zone enterprises excluded) has a dual problem. First it uses mostly obsolete technology and faces fierce competition from imported products. Second, it lags behind in terms of competitiveness because competitiveness no longer relies only on production technique but also on marketing technique, which largely required information and communication technologies.

In order to revitalize the industrial apparatus, several actions will be carried out:

  • - upgrading and restructuring enterprises by improving their productivity, notably in the target sectors of activity considered priority, such as agroindustry and construction materials;

  • - investment and technology promotion;

  • - improvement of standards and quality to make the products competitive; and

  • - implementation of a policy for integrating the rural economy in the industrial economy and establishment of agroindustrial development poles.

The development of small and micro enterprises in general and cottage industry in particular helps thicken the economic fabric, increase jobs opportunities, and improve incomes. To promote this sector, credit institutions must be set up, in collaboration with the private sector, which would deal first and foremost with enterprises, small ones in particular that currently find it difficult to obtain loans from commercial banks and financial institutions.

The programs to be implemented will consist in:

  • - supporting the revival of the cooperative movement through the emergence, consolidation and self-sufficiency of grassroots organizations,

  • - promoting cooperatives of micro enterprises and cottage industry by organizing the sector to create synergies,

  • - improving the performance of micro and small enterprises by strengthening their capacity, particularly through technical and managerial training and coaching,

  • - providing institutional support for the promotion and development of micro and small enterprises with a track record,

  • - developing suitable financing systems for enhancing the competitiveness of small and micro enterprises and for assisting in the development of microcredit systems with a view to their financial autonomy.

As a result, the sector is expected to be revitalized and productivity improved.

5.2.5 Opening up to world competition

Opening up to world competition calls for relevant actions to ensure the competitiveness and performance of Malagasy products. Beside AGOA, which will come to an end in 2004, the United States of America is at present developing the Millennium Challenge Fund, which amounts to USD 5 billion and is intended for emerging market economy countries. The eligibility criteria are linked to good governance, transparency, the rule of law, and other conditionalities. This is a new opportunity for which Madagascar must be prepared.

From this viewpoint, actions to take should focus on intervention in the following areas:

  • - to ensure that trade can be an engine of growth and development, trade policy must fit into an overall development framework. More specifically, this process of integration calls for priority actions accompanied by an action plan that envisages consistent and concerted technical assistance and capacity building related to trade;

  • - to be effective, integration also requires a major program that expends “beyond borders” given that the actions of the public authorities in this area will probably enhance the role that trade may play poverty reduction.

It is also necessary for the development policy to be consistent with regional integration. Thus, integration efforts must be enhanced by improved market access.

5.2.5.1 International, regional and national economic integration

The objective is to contribute to the establishment, advancement, and materialization of a subregional and regional economic community and integration into the world economy.

Actions to be carried out will be as follows:

  • - to intensify awareness and dissemination campaigns on the agreements and conventions that Madagascar has signed: organization of information and training actions for operators and the Administration on the implications of regional integration (Indian Ocean Commission—IOC, Common Market for Eastern and Southern Africa—COMESA, South African Development Community—SADC, Ocean Rim Association for Regional Cooperation—IOR, Regional Integration Facilitation Forum—RIFF...), multilateral and bilateral agreements (AGOA, Cotonou Partnership Agreement...) and of WTO rules to better use the advantages and opportunities derived therefrom and detect compliance or noncompliance with commitments;

  • - prepare and distribute commercial information bulletins, a guide for exporters, and a collection of texts relating to trade and regional integration translated into several languages (Malagasy, French, English);

  • - rationalize and harmonize relations with international nongovernmental organizations that are operating in various areas with a view to developing inter-regional and inter-provincial exchanges. Promotion of new forms of cooperation emphasizing preference to direct contacts between entities of the same size and of the same social object.

  • - to coordinate and activate the whole program of government and non-government actions

  • - to take advantage of the regional integration to develop partnership and town twinning

The expected result is the increase in value and in volume of the exports by expanding and diversifying the market.

5.2.5.2 Development of the industrial manufacturing sector

The objectives are to increase the availability of goods and services and to promote exchanges and to draft a strategy to improve competitiveness in the industrial sector, all with a view to developing trade.

The actions to be taken are:

  • - define an industrialization policy in collaboration with the private sector, particularly the representative group, aimed at the promoting links through specialization, paying special attention to comparative advantage;

  • - re-examine the system of import control by: (i) combining verification and information systems, (ii) effectively computerizing the customs service, (iii) implementing a customs security procedure, (iv) re-examining the tariff policy by differentiating the rates on inputs from those on products imported finished.

The expected result will be to create more national value-added.

5.2.5.3 Investment promotion

This concerns the adoption of macroeconomic measures that will attract private investments.

The actions to be taken are:

  • - mobilization of international and national flows of funds by fostering the development of joint- ventures and partnership, either in the form of foreign direct investment (IDE) and/or stock market funds, either by acquiring equity participations or any form of capitalization through incentive measures within the framework of a simplified legal and regulatory system;

  • - emergence of “national capitalism” by the facilitating secure technology transfer and technical support agreements, creating piggy-back funds and participations, implementing mechanisms for accessing and evaluating property contributions;

  • - promotion of corporate governance with respect for shareholders, taking into account the measures taken by the Business Law Reform Commission (CRDA) on minority rights.

The expected outcome is an increase in the volume of investments.

5.2.5.4 Investment security in the context of creating a favorable investment climate

The government will take measures to protect and guarantee investments. The actions consist in:

  • - prioritization and acceleration of business law and regulatory reform (creation, promotion and development of enterprises, long lease and insurance);

  • - setting up an investment security system pursuant to international agreements and regulated by a simplified and clear Investment Charter, listing the various advantages, possibilities of insurance, reinsurance or of international counter-guarantees, and encouraging recourse to arbitration through the Madagascar Arbitration and Mediation Chamber; and consolidating their application before the courts;

  • - development of bilateral agreements on investment protection;

  • - observance of intellectual property rights in the promotion, transfer and dissemination of technology.

As mentioned earlier, the expected outcome is an increase in the volume of investments.

5.2.6 Rural development

Its intensity and its incidence indicate that poverty is a much greater concern in the rural areas than in the urban areas. The goals of economic growth and poverty reduction are, however, dependent upon the performance of the rural development sector. Accordingly, the latter is expected to play a prominent role in poverty reduction strategy, a role that will result in an annual growth rate of at least 4 percent over the period 2003 – 2005.

For this purpose, the program drawn up under the PRSP will have a number of components which will rest on rural development policy and sectoral strategies, particularly the five guidelines36 of the Rural Development Action Plan (PADR), which constitutes the implementation framework for the various actions. Thanks to the participative and bottom-up approach initiated under the PADR, it will be possible to decompartmentalize the subsectors of rural development, to involve all involved in rural development, and to take into account the needs expressed by the regions and subregions. The process will also add an element of coherence to the interventions.

5.2.6.1 Governance and improvement of the institutional framework.

The PADR is subject to an improvement of its institutional framework and of the access structures regarding to the need to clarify the roles and responsibilities of rural development agents. The government will continue the institutional reforms now underway at the local, regional and national levels. They should be favorable to economic development, in harmony with respect for the environment and for the most underprivileged segments of the society.

The measures taken will eventually result in the division of roles, namely those conferred on groups of rural development agents. The principles of divestment and refocusing of the role of Government on its essential missions have been established. From now on, the Government will assume the functions of support for production, steering sectors (defining policy, setting and controlling standards of quality of agricultural products, etc.) and the management of public sector financial and human resources. Production and marketing activities have been definitively handed over to the private sector including farmers’ associations.

This institutional reform is based on deconcentration and decentralization of services with a view to developing quality local services. To attain the objectives, development programs on a regional basis will have to be designed, monitored and implemented. In this connection, the government has initiated the deconcentration/decentralization of decision-making and management authority, which will give more responsibilities to development agents and enable policies to be formulated in the field.

In view of the large number of economic operators and the decentralization process, it is essential to have a strong national capacity for consensus building and coordination to fully decompartmentalize rural development subsectors and ministerial departments.

In the context of good governance in the sector, a number of measures aimed at improving transparency will be taken and red tape will be eliminated. Moreover, the administration’s capacity for control and research strengthened and services will be reorganized in order to improve the administration’s performance.

A legal and regulatory environment favorable to the different rural development sectors will be established (compliance with rules and procedures, ensuring the safety of ticket-giving officers). It consists in reviewing and/or amending, updating the regulatory texts, statutes (Water Utility Users’ Association—AUE, Vaomieran’ny Ala, non-mutual institutions), rules (marketing, exportation), animal health police, tax system, land laws, etc., as incentives for investment in rural development.

Thus, taxation on agricultural products, inputs and farm materials, the transportation system, etc. will be adapted to maintain strong incentives for sector growth. The first measures taken in 2000 made it possible to eliminate the bulk of the negative effects that had put pressure on the sector, causing economic distortions in the cost of inputs and excessive competition with such local products as rice. This refers to the 35-percent tax on imported rice (15-percent import tax + 20-percent VAT) and the exemption of inputs and strictly agricultural equipment from import tax and VAT. The means of perpetuating such measures will be examined in order to provide security for developing marketing and distribution.

The Government will continue to liberalize trade and investment, in particular within the framework of regional initiatives to which Madagascar is a party. The bidding procedure is now commonly used to ensure transparent management of grants (food and agricultural products, inputs, agricultural materials), which makes markets more fluid. Import management will reflect transparency (import volumes, custom duties actually applied). In order to improve exports, export quality standards will be brought in line with international requirements.

The development of a system of information and the promotion of information networks is important in the farming and livestock sector, to make available to agricultural development agents the necessary economic, technical and statistical information. In the forestry sector, this system will allow for better management of forestry resources. In the field of research, it will make it possible to develop the content of agricultural information island-wide.

Development agents, namely the private sector and the farmers’ associations (OP), need regular information about price changes, available supply, international market conditions, or the list of export opportunities, etc. The Market Information System (SIM) has been instituted to provide a survey and regular dissemination of information on the prices of agricultural products. In addition, the rural observatory network (ROR) has been used to evaluate the impact of a number of economic measures on rural households.

To win the support and participation of rural communities, information for the general public on rural development will be reinforced through the media and the Documentation and Training centers on the New Information and Communications Technologies (NCIT), which began to be opened in all the fivondronana in 2001.

5.2.6.2 Development of agricultural production

The increase in production and therefore the diversification and increase in sources of income for producers and of exporters will come about through the development, intensification and diversification of production in the growth sectors (livestock, forestry, fisheries, fruits and vegetables, etc.) by taking advantage of the comparative advantages of each region. To this end, dynamic poles of growth will be developed with the support of the operators who provide backing [opérateurs aval]. The point is to encourage the development of income-generating secondary activities (cottage industry, non-wood forestry products, tourism, fisheries, and others) in support of poor populations.

In order to succeed in efficiently developing the sector, support for the organization and professional development of producers is important, by encouraging them to form associations to make them partners in the rural development process. The creation of the Chambers of Agriculture or Tranon’ny Tantsaha at all levels (national, regional, departmental and communal) is an essential element for making the structures permanent.

Furthermore, the system of agricultural education and training will be restructured by introducing synergies between research/production/training, promoting agricultural training to improve the sector’s performance and competence. Strengthening and revitalization of technical and occupational training will be implemented to cover the sectors needs in human resources and technical expertise (need for technicians at different levels).

Put on hold since the last decade, the resumption of agricultural mechanization is absolutely key to the drafting of strategies for combating poverty. An important measure that the Government has taken is to remove taxes on agricultural materials. Moreover, to enhance the special efforts in this area, rural development projects will be oriented towards incorporating mechanization.

A setting favorable to the emergence of organizations of producers and farmers will be created to promote a “pro-environment” label. In view of the growth of financial flows mobilized at the decentralized level, the capacity for financial control will be reinforced.

5.2.6.3 Financing for the rural world

For a number of years, rural areas have begun to be financed through micro finance institutions, both mutuals, operating under Law 96-030, and non-mutuals, whose regulatory framework should come out shortly. The results are modest at present but the outlook is very promising. Practically all the autonomous provinces have at least one chain, which in the coming years will significantly increase its rate of penetration into the province as a result of:

  • - greater participation by rural producers in providing rural financing and better risk sharing with financial agencies having an acceptable institutional capacity;

  • - introduction of an “education credit” approach into areas not served by the financial agencies;

  • - promotion of farmers’ investment funding in areas with a Joint Guarantee Fund and a Farmers’ Operating Structure, having the necessary supervisory and monitoring systems;

  • - intervention in zones with high potential.

The Government will also have to work out the means of setting up financing systems that are adapted and accessible to the poor for income-generating activities that are environmentally friendly (cottage industry, crop credit, social infrastructure, small farming implements).

5.2.6.4 Research

A research program responding to the technical problems of development in the regions and/or the development of production chains will be implemented. In addition the results of the research will be acknowledged, used, and disseminated in partnership with private and international institutions.

As far as livestock farming is concerned, development and dissemination of animal immunization will be achieved by modernizing the veterinarian vaccination production line, with the scientific assistance of regional and international institutions.

Some technological research applied to priority human needs and environmental research to improve living conditions will be carried out so as to: (i) improve housing conditions, (ii) make rural roads usable all year round, (iii) manage natural resources better, (iv) reduce agroindustrial pollution, and (v) reduce environmental factors that contribute to disease.

5.2.6.5 Food security

Animal diseases and plant health problems are among the major causes of food insecurity. This can be controlled by means of:

  • - consolidation of partnership with border control officers and the private sector to guard against new diseases that might find their way into the island, and reduce the cases of prevailing diseases;

  • - plant health control against the dissemination of organisms that might damage crops, underpinned by effective control of imported and exported plant matter, to control crop diseases and pests;

  • - adoption of an appropriate plan of attack.

The fight against food insecurity is a key objective. Thus, a stable supply must be ensured in all places and at all times. The fact that service roads are unfit for traffic, especially in rural areas, puts crop producing zones at a disadvantage and taxes returns on rural production. Supplies of inputs, materials and essential goods are hampered.

The development of rural transport is taken into account in the Rural Area Transport Program (PTMR) whose strategies consist in: (i) setting up a Rural Transport Coordination Unit, (ii) integrating intermediate means of transport (MIT), (iii) involving decentralized local authorities, and (iv) improving transport infrastructure. A marked effort will be made to disenclave producing areas by rehabilitating and maintaining rural roads. The communication routes to be rehabilitated will be ranked so that their rehabilitation and maintenance can be underwritten either at national, provincial or communal levels. At least 10 percent of the annual budget of the Road Maintenance Fund (FER) will be allocated to the repair and maintenance of rural roads. (see section on basic infrastructure).

To cope with emergency situations (cyclones, drought, swarms of migratory locusts, animal epidemics and plant health problems, etc.), the systems for forecasting and monitoring natural disasters and warning systems, as well as the