72669 v1 World Trade Indicators 2009/10 Madagascar Trade Brief Trade Policy relatively favorable access to foreign markets. Telling a similar story, the weighted average overall rest of the Madagascar has been implementing trade reforms world tariff (including preferences) faced by the since the 1980s and recently, in 2005, it simplified its country’s exports is a low 0.8 percent. Although the tariff structure and consolidated its import duties. country’s market access is favorable overall, its With an MFN Tariff Trade Restrictiveness Index agricultural products face significantly higher trade (TTRI)1 of 13.6 percent, the country appears to have a barriers (3.4 percent) than its non-agricultural products slightly more restrictive trade regime than its Sub- (0.2 percent). The Madagascan currency, the ariary, Saharan Africa (SSA) (11.3 percent) and low-income appreciated by 9 percent against the U.S. dollar in country comparators (11.6 percent). It ranks 115th nominal terms in 2008, making the country’s exports among 125 countries. The country’s agricultural and more expensive in foreign currency terms. non-agricultural sectors enjoy a similar level of tariff protection. The country’s average MFN applied tariff To boost its market access, Madagascar initialed an including ad valorem equivalents of specific tariffs is interim Economic Partnership Agreement (EPA) with 12.4 percent, although, taking into account the EU in December 2007, providing a framework for preferences, the applied tariff is 11.3 percent. The the completion of a comprehensive EPA in the future. maximum MFN tariff (excluding alcohol and tobacco) The country benefitted from membership in the applied by the country is 20 percent. Its trade policy Southern African Development Community (SADC), space, as measured by the wedge between bound and whose Trade Protocol, which was signed in 1996 and applied tariffs (the overhang), is 17.1 percent. came into force in 2000, culminated in the launch of a Madagascar ranks last out of 148 countries on the free trade area in August 2008. However, Madagascar’s GATS Commitments Index, indicating substantial membership was suspended in March 2009 following a room for further commitment to services trade coup d’état in which the opposition leader, Andry liberalization. Rajoelina, took over from the president, Marc Ravalomanana. As a further blow to its market access, To address the food and fuel crisis in 2008, the Madagascar may face reduced access to some of its government reduced import duties on oil, flour, and clothing markets given South Africa’s application to rice, and also restricted rice exports from March to the International Trade Administration Commission in November of that year. June 2009 to raise tariffs on 127 lines of garments from 40 to 45 percent, and the end of the Multi Fibre Arrangement (MFA), which had previously restricted External Environment the exports of China and other Asian competitors to As judged by its Market Access TTRI2 including the North American and European markets. Clothing preferences of 1.3 percent, which is far below both the accounts for about a quarter of Madagascar’s exports. SSA (3.9 percent) and the low-income country (5.6 The country also belongs to the Common Market for percent) averages, Madagascar’s exports enjoy Eastern and Southern Africa (COMESA), which established a customs union in June 2009 with plans of fully implementing it by 2012. Unless otherwise indicated, all data are as of August 2009 and are drawn from the World Trade Indicators 2009/10 Behind the Border Constraints Database. The database, Country Trade Briefs and Trade-at-a-Glance Tables, are available at Madagascar remained in the bottom 30 percent of http://www.worldbank.org/wti. international business environments in 2009, being ranked 134th out of 183 countries, in the Ease of If using information from this brief, please provide the Doing Business index. On the Logistics Performance following source citation: World Bank. 2010. Index (LPI), which measures the extent of trade “Madagascar Trade Brief.� World Trade Indicators 2009/10: facilitation in the country, Madagascar scores 2.24, on Country Trade Briefs. Washington, DC: World Bank. a scale of 1 to 5, lagging behind the SSA and low- Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Madagascar Trade Brief income averages of 2.35 and 2.29, respectively. It constant. It is weighted by import values and import ranks 120th (out of 150) in the world and 27th (out of demand elasticities of trading partners. 39) in the SSA region. Its best performance on the LPI 3. Institut National de la Statistique de Madagascar 2009a, is in lowering domestic logistics costs while its weakest 2009b. performance is in the competence of the local logistics 4. African Economic Outlook, 2009. industry. 5. African Economic Outlook, 2009. Trade Outcomes References Trade grew at a healthy rate of 10.6 percent in real African Economic Outlook. 2009. “Madagascar.� terms (in constant 2000 U.S. dollars) in 2008, through African Economic Outlook. May 27, 2009. a deceleration from an impressive 23 percent growth . World Bank estimates suggest sharp deceleration in BBC News. 2009. “Pressure Grows on Madagascar export growth to 2.9 percent in 2008 from 25 percent Coup.� March 20, 2009. . decline to 15.6 percent in 2008 from 21.8 percent in COMESA. 2009. “COMESA Launches its Customs 2007. Both exports and imports are expected to fall in Union.� COMESA. July 24, 2009. . In nominal terms, trade growth slowed to an estimated Europa. 2009. “Africa, Caribbean, Pacific—Regional 17.9 percent in 2008 from 28.5 percent the year Negotiations of Economic Partnership Agreements.� before, and is expected to turn negative in 2009, with trade falling by 7.1 percent. World Bank estimates Europa. June 2009. . percent in 2007 to 2.5 percent in 2008, and a smaller Food and Agriculture Organization of the United Nations fall in import growth from 36 percent in 2007 to 28.1 (FAO). 2008. “Policy Measures Taken by Govern- percent in 2008, driven by rising imports of mining ments to Reduce the Impact of Soaring Prices— equipment and high food and fuel prices. National Africa—Madagascar.� FAO. December 15, 2008. statistics3 show a 24 percent increase in goods exports . in nominal U.S. dollar terms in 2008, lower than the Institut National de la Statistique de Madagascar. 2009a. growth rate of 36 percent the previous year, as a result “Exportations de Madagascar.� . percent, compared to 28.6 percent in 2007,4 as textile ———. 2009b. “Importations de Madagascar.� companies continued to be negatively affected by the . exports, dominated by textiles, Madagascar is expected Global Trade Alert. 2009. “South Africa: Likely Tariff to start exporting ilmenite from its Taolagnaro mine in Increases from 40% to 45% on 127 Lines of 2009. FDI is estimated to have doubled between 2006 Garments.� Global Trade Alert. July 1, 2009. and 2008,5 due mainly to inflows into mining projects. Notes Reuters. 2009. “Southern Africa Suspends Madagascar 1. TTRI calculates the equivalent uniform tariff that from SADC.� Reuters. March 30, 2009. would keep domestic welfare constant. It is weighted by . 2. MA-TTRI calculates the equivalent uniform tariff of SADC Today. 2009. “Implementation of SADC Trade trading partners that would keep their level of imports Protocol on Track.� . Madagascar Trade Brief World Trade Indicators 2009/10 Southern African Development Community (SADC). 2008. “Final Communiqué of the 28th Summit of SADC Heads of State and Government.� SADC. August 2008. . The Economist Intelligence Unit (EIU). 2009. Country Report—Madagascar. EIU. June 2009. . World Bank. 2008. “Double Jeopardy: Responding to High Food and Fuel Prices.� World Bank. July 2, 2008. . World Trade Organization. 2008. “Trade Policy Review Body—Trade Policy Review—Report by the Secretariat—Madagascar—Revision—Part 2.� World Trade Organization. May 28, 2008. .