8 September 2017

Industrialization for Stronger and More Inclusive Growth in Madagascar

Antananarivo — The adoption of an ambitious industrial policy that focuses on spatial concentration, and in harmony with local industry and the sustainable development of natural resources is one of the essential conditions for inclusive and sustainable growth in Madagascar. This is one of the recommendations of the official launch of the country profile that took place in Antananarivo, in the presence of the Minister at the Presidency in charge of Mines and Petroleum.

During that launch, the government of Madagascar presented the new Industrial Development Act which will be discussed and adopted by the Parliament. One of its main objectives is to increase the share of industrilisation to 25 percent of GDP (compared with about 15 percent today) and to better integrate local industry into value chains by targeting agribusinesses, construction materials and greater substitution on imports. Setting up of industrial investment zones to focus on spatial clustering methods and improving local supply is also one of the main proposals of that Act.

The country profile, produced by the UN Economic Commission for Africa (ECA), argues that in 2017 Madagascar found a new growth dynamic, both stronger and more inclusive. Thus, the level of Foreign Direct Investment (FDI) reached 5 percent of GDP in 2016, one of the highest rates in the subregion.

Growth is also driven by the government's commitment to promote more inclusive growth through massive investments in infrastructure and social services, while poverty affects 71.5 percent of the population, a rate that has not reduced since 1991.

Vulnerability to climate change, weak domestic resources and declining agricultural productivity are other risk factors for the growth of Madagascar.

One of the special characteristics of the Malagasy economy is that, since early 1990s the country developed a more export oriented dynamic manufacturing sector through the Export Processing Zones. This has contributed up to 60 percent of the Madagascar's exports and account for 20 percent of formal employment.

The Export Processing Zones are recording successful recovery since 2016, and their sectoral growth is expected to reach more than 15 percent by 2017. But, their integration into the economy is relatively low (75 percent of inputs are still imported) and their role in the overall growth is limited.

To benefit the ripple effect on the economy, the country profile recommends a focus on industries around logistics hubs, increase of local content, especially through the development of agro-industry and preservation of the natural capital of the country.

For more information, you can download Madagascar Country Profile on:

https://www.uneca.org/sites/default/files/uploaded-documents/CountryProfiles/2017/madagascar_cp_eng.pdf

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