Madagascar Economic Policy and Development Potential

Madagascar Economic Policy and Development Potential

With continued population growth of currently approx. 2.7%, persistent structures and only low investment dynamics, it is likely that the seriously low standard of living of the population of Madagascar will deteriorate further, the overexploitation of nature will increase and political unrest will become probable. In order to counteract the downward spiral in an economically, socially and environmentally friendly way, Madagascar has made efforts in recent years and generated funds through various partnerships with international financiers as well as attract investors. The government wants to avoid a restrictive and inwardly oriented trade and exchange rate policy, as it was in the 1990’s. The Economic Development Board of Madagascar ( EDBM) is responsible for developing and maintaining economic relationships. The EU is an important partner. The Economic Partnership Agreement (EPA) with the EU – signed in 2009 – aims, for example, for Madagascar to face the challenges of globalization better prepare by promoting regional integration and diversification of the export range. This also includes the ESA program, which is specially geared towards the islands of the Indian Ocean (Comoros, Madagascar, Mauritius, Seychelles). Madagascar has had an eventful history¬†with SADC; in 2014 the organization resumed the country after a suspension in 2009. Developing a common market is also the aim of COMESA (Madagascar joined in 1981), to which Madagascar has close ties. There is overlap here with the SADC. The most important bilateral partners are France and the USA (USAID). Madagascar has also been a member of the since 199 5WTO. The economic activities of China in Madagascar and their consequences are repeatedly discussed controversially.

Competing economic players in Madagascar

According to hyperrestaurant, in 2006 Madagascar became the first country to qualify for the US Millennium Challenge Account (MCA). MCA as an ambitious development plan should help the country to reduce poverty and instability by defining the transition from a subsistence economy to a market economy as a priority. The lack of land rights of the population and the lack of access to financial services in rural areas were seen as a decisive obstacle to investment in the agricultural sector. The Millennium Challenge Cooperation (MCC), founded specifically to manage MCA funds, ended its support to Madagascar in 2009 in the wake of the political crisis. MCA’s expectations do not seem to have been met to the same extent that have been assigned to him. Exact results cannot be viewed. Today, the US is once again Madagascar’s largest bilateral partner after direct support was suspended in 2009. The World Bank has major projects in Madagascar, and under the new Rajoelina government it has given the country considerable support. The International Development Fund (IDA), the African Development Fund (ADF, part of the African Development Bank Group) are other direct financiers ahead of France and Germany.

The Millennium Development Goals (MDGs) have largely been achieved in Madagascar, although some goals have only been partially implemented and others are still on the way. Important goals such as the reduction of maternal and child mortality, the provision of comprehensive primary education and the reduction of poverty and hunger have not been achieved. In MDG 7, too, only partial goals have been implemented, other areas such as access to clean drinking water or sanitary facilities and the expansion of forest areas have even been postponed to 2023/2025.

To the development potential of Madagascar include the commercially possible funding or the removal of a wide range of mineral resources, the ship’s connection to the international ferry traffic, unique for the expansion of tourism biodiversity of the island and the integration into international economic cooperation. However, the risks of sustainable development are still responsible for the fact that the upswing is slow: the overall poor infrastructure in the country, the slow bureaucracy and high levels of corruption, a low level of education among the population, potential for political unrest and a still quite unstable government with inadequate rule of law and the lack of long-term prospects. The additional conditions that are necessary for private investments, such as foreseeable administrative action or access to credit, are often insufficient. The debt relief of 2004 or 2010 did not give the country any real development impetus, even through the fiscal restart.

Overall, Madagascar can only react slowly or not at all to external shocks such as droughts and / or the effects of cyclones and has hardly any financial reserves to cushion economic downturns. The reasons for this are, for example, the low tax revenues and the fact that there is a certain degree of reluctance towards the government internationally. That applied to Rajaonarimampianina, who was under extreme pressure to develop and implement convincing solutions to the country’s still enormous problems. However, this applies even more to the current president, who is supposed to “do better than before”.

Madagascar Economic Policy