WORLD TRADE
ORGANIZATIONWT/TPR/M/80
11 June 2001
(01-2858)
Trade Policy Review Body
19 and 21 February 2001
TRADE POLICY REVIEW
MADAGASCAR
Minutes of Meeting
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF MADAGASCAR 4III. STATEMENT BY THE DISCUSSANT 7
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 10
V. REPLIES FROM THE REPRESENTATIVE OF MADAGASCAR AND
ADDITIONAL COMMENTS 14
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 18ANNEX I ADVANCE WRITTEN QUESTIONS BY MEMBERS 21
ANNEX II WRITTEN RESPONSES BY THE DELEGATION OF MADAGASCAR 32WT/TPR/M/80
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The first Trade Policy Review of Madagascar was held on 19 and 21 February 2001.  The
Chairperson, H.E. Mr. Pekka Huhtaniemi (Finland) , welcomed the delegation of Madagascar, led by
the Minister of Commerce and Consumption, H.E. Mr. Alphonse Randrianambinina, and the
discussant, Ms. Laurence Dubois-Destrizais (Franc e).  He reminded Members that the discussant
would speak in her personal capacity and not as a representative of her country.  In accordance with
the established procedures, the discussant had made available, in advance, an outline of the main
issues she intended to raise.
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures for the meeting.  The Report by the Government of Madagascar was contained in
document WT/TPR/G/80, and that of the WTO Secretariat in document WT/TPR/S/80;  the main
issues to be raised by the discussant were contained in document WT/TPR/D/59.  Copies of advance
written questions submitted by Hong Kong, China;  Canada;  the EU;  Japan;  Mauritius;  and the
United States had been transmitted to the delegation of Madagascar.  These are reproduced in
Annex I.  Written responses by the delegation of Madagascar to advance written questions and otherquestions raised during the first day of the meeting are reproduced in Annex II.WT/TPR/M/80
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF MADAGASCAR
3. The representative of Madagascar expressed his country's commitment to the multilateral
trading system, and welcomed the opportunity to present his country's trade policies and practices.The Government's policy was to develop the country' s participation in the multilateral trading system.
He stated that there were certain corrections and additions to the Government Report.
4. Madagascar viewed the principles of democracy, good governance, and transparency as
necessary elements of development.  Madagascar, the world's fourth largest island, was characterized
by the diversity of its climate, topography, flora and fauna, people, and sub-soil.  Some 80% of thepopulation, estimated at 15 million, lived in rural areas.
5. Despite its potential, Madagascar was continually subject to natural disasters, such as
cyclones, drought, floods, and locust.  In the first months of 2000, Madagascar was hit by three
cyclones, which destroyed livestock, and damaged infrastructure and housing.  These disasters had
significant impact on crops, exports, demand for imports of foodstuffs, and as a result, on the trade
balance and economic growth.
6. Since the 1980s, Madagascar had engaged in a constructive dialogue with the Bretton Woods
institutions and had undertaken a programme of stru ctural adjustment advocated by these institutions
as well as by other bilateral and multilateral organizations.  These programmes had had encouraging
results.  Since 1997, economic growth had outpaced  the population growth rate of 2.8%;  GDP had
grown at the rate of 4.5% in the past three years, and 5% in 2000.  Inflation had fallen from 29% in
1993 to 10% in 2000.
7. The Government was committed to reducing poverty.  In coordination with various
development partners, including the private sector and civil society, the Government had prepared an
interim Poverty Reduction Strategy Paper (PRSP) highlighting several areas:  production, investment,
and commerce;  health and nutrition;  education and culture;  infrastructure;  rural development and
the environment;  and institutional development and decentralization.  The World Bank and the IMFhad already approved the PRSP, and the Government would continue the participatory process with
the view to preparing a more broadly based final version.  At this stage, Madagascar had qualified for
debt reduction of US$1.5 billion under the initiative.
8. The economic reform programme had enabled the country to establish a market-based
economy.  Government was withdrawing from the production and distribution sectors, and devoting
itself to development of an overall framework and the social sector.  The Government's objectives
were the development of a private sector and a climate favourable to trade and investment.
9. In order to improve tax revenues and diminish reliance on taxes on trade, new measures had
been adopted:  the VAT and the excise tax bases had been broadened, and the administration of
finances and customs had been reorganized.  In addition, restrictions on trade, foreign exchange, andforeign transactions had been eliminated, and the opening of accounts and making of loans in foreign
currencies had been authorized.  Madagascar accepted the obligations of Article VIII of the statutes of
the IMF.  The exchange rate of the Malagasy currency was market determined.
10. To fully realize Madagascar's potential, the Government had identified certain sectors as key
to the implementation of the economic policies.  The primary sector involved 75% of the active
population, yet contributed only one third of GDP.  This sector remained the basis of all transactions,
contributing 80% of exports.  With respect to agriculture, the Government had adopted a plan for ruraldevelopment.  With respect to forestry, the Go vernment intended to maintain a balance between
exploitation and conservation.WT/TPR/M/80
Page 5
11. Regarding livestock, the Government had adopted measures necessary to address the
repercussions from the swine-fever that affected the country in 1998-99;  the beef branch had been
reorganized in order to resume exports suspended since 1997.  In the fisheries branch, shrimps werethe primary export commodity.  The Government, in coordination with relevant parties, was in the
process of establishing a programme to control and monitor the branch.  Competitive and transparent
measures for the issuance of shrimp fishing licences had been adopted.
12. Mining constituted a strategic sector in the development of Madagascar.  A new mining code
had been adopted, and the Government was in the process of preparing a law governing investmentsover US$150 million in the sector and providing investment incentives.
13. The secondary sector, primarily comprised of textiles, petrol, metallurgy, and wood
production, as well as shipyard activities, contributed 15% of GDP.  The Government, intending to
attract foreign direct investment, had adopted measures providing financial benefits to companies
authorized to operate in the export processing zones (EPZ).
14. The tertiary sector contributed more than 50% to GDP through a variety of activities:  trade,
tourism, transportation, communication, etc.  With its abundant bio-diversity, rate of "endeminism",diverse climate, and 500 km. of coastline, Madagascar possessed a great potential for development of
the tourism sector, but this would require investments in hotel infrastructure.  The Government had
established certain real estate reserves in order to develop tourism.  Entry visas could be obtained in
the airport upon arrival.
15. In the area of transportation, the Government was progressively withdrawing from the
provision of services and was furthering the policy of liberalization and privatization.
Air Madagascar would be privatized in 2001, and the Madagascar Civil Aviation Authority had been
established and vested with responsibility for regulation of air transportation.
16. The Government had established a policy for liberalization of the telecommunications
subsector, permitting local and foreign competition, particularly for value-added services.  The basictelecommunications company would be privatized in 2001.  The number of users of mobile phones
had increased on average by 11% in 1998 and 1999.  The Ministry of Post and Telecommunications
was responsible for telecommunications policies, and the Malagasy Office for the Study and
Regulation of Telecommunications (OMERT), for the granting of licences, and authorization to
service providers, including suppliers of terminal and auxiliary services.
17. Given its geographical location, its low cost of labour, its participation in the Cotonou
Agreement, and qualification for the Generalized System of Preferences, Madagascar presented
numerous opportunities for investments.  Administrative restrictions on investments had been
removed, and foreign investors enjoyed national treatment, as provided in the general fiscal statutes.
Moreover, investments directed towards exports were subject to a system of financial incentive, asprovided in the EPZ statute.  Foreign invest ors could own 100% of companies in Madagascar,
including commercial banks.
18. Madagascar's constant trade deficit had improved from SDR 127 million to SDR 115 million
between 1997 and 1999.  Madagascar was creating the conditions conducive to its integration into the
world economy through the diversification of its trade relations.  Madagascar granted at least MFN
treatment to all its trading partners.  It participated in the WTO, the ACP/EU Agreement, COMESA,
the Indian Ocean Commission, and the Regional Integration Facilitation Forum, and had concludedseveral bilateral agreements.  Madagascar had liberalized its imports through the dismantling of
quantitative restrictions and exchange controls, and the simplification of its customs tariff and import
procedures.  Exports had been fully liberalized and were diversifying.WT/TPR/M/80
Page 6
19. Financial, professional, tourism and communications services, as well as air transport had
been liberalized.  A law on insurance was promulgate d.  Important investment and infrastructure were
required for the development of electronic commerce.  Madagascar had been implementing the WTOprovisions on customs valuation since 17 November 2000.  It needed technical assistance to meet its
WTO obligations in various areas, including notification.  It had paid all its arrears of contributions to
the WTO in 1999.  Madagascar had committed itself to opening its economy through its participation
in regional and bilateral agreements, and its progressive integration into the multilateral trading
system.WT/TPR/M/80
Page 7
III. STATEMENT BY THE DISCUSSANT
20. The discussant (Ms. Laurence Dubois-Destrizais) noted that, in the mid 1990s Madagascar
had undergone a process of ambitious reforms aimed at integrating the country into the worldeconomy.  She stated that the occasion of this TPR presented opportunities to discover how the WTO
could assist Madagascar in this endeavour.
21. The measures towards greater stability were beginning to bear fruit, and all observers had
noted the improvement in Madagascar's macroeconomic situation over the past four years.  Good
economic performance had been achieved in several areas:  increased public investments;  improvedreserve holdings by the Bank of Madagascar;  and timely debt service payments.  Inflation had been
reduced from over 45% in 1995 to 7.6% in early 2001.  Despite the ravaging effects of three cyclones
in the past year, and increased world fuel prices, economic growth outpaced population growth.
22. The Malagasy economy continued to be handicapped by a persistent trade deficit, a very
heavy debt burden, and insufficient domestic savings.  Madagascar was supported by international
organizations, which were financin g over 80% of public investment projects.  The weakness of the
infrastructure system imposed considerable impedime nts to the growth of the economy, particularly in
the rural sector.  The importance of the informal sector was destabilizing the structure of the market.
23. She commended the Government's objective that economic development should be to the
benefit of as large a portion of the population as possible, and noted that the Poverty Reduction
Strategy Paper (PRSP) was proof of this endeavour.
24. She noted the lack of transparency and predictability in rules pertaining to investments, the
slow implementation of the reforms in this area,  and encouraged the Government to pursue the
reforms, which were at an early stage.
25. In recognition of the Government's reform efforts, the IMF and World Bank, in December
2000, determined that Madagascar had qualified for US$1.5 billion in debt relief under the HIPC
initiative.  In addition, Madagascar would benefit from the new opportunities offered by the CotonouAgreement, which created a true partnership be tween the EU and the ACP countries.  The EU's
"everything but arms" initiative also would have a positive impact.  Madagascar would soon qualify
under the U.S. AGOA, which would permit duty-fr ee entry of Malagasy products into the
United States.  These initiatives offered Madagascar positive development prospects.
26. Madagascar had made considerable efforts to create an environment favourable to private
investment, both foreign and domestic, and 100% foreign ownership was possible, with the exception
of certain sectors.  The 259 enterprises established in the export-processing zones contributed
dynamically to the economy.  Nonetheless, difficulties in acquiring real estate still existed and could
constitute an impediment to foreign investments, especially in the tourism sector.  She enquired
whether Madagascar envisioned reform of the real property laws.
27. She sought clarification on the autonomy of provinces, established since the December 2000
elections, given that this might favour or restrain FDI at the regional level.
28. The privatization programme had progressed well since 1996, although the Secretariat Report
noted some slowdown in the proce ss, notably in the services sector.  The positive results of the
privatization of the banking sector, since 1998, demonstrated that privatization led to new economic
dynamism.  She encouraged Madagascar to pursue an open and clear privatization policy in order to
attract new private investments, and to ensure the competitiveness of local enterprises, which wereoperating in a regional competitive environment.  In this regard, she enquired whether theWT/TPR/M/80
Page 8
Government had advanced in the privatization of the national airline (Air Madagascar), the airport
authority (ADEMA), and the telecommunications company (TELMA).
29. Despite the Government's best efforts, Madagascar had encountered difficulties in meeting its
multilateral obligations, particularly its WTO obligations, due to lack of institutional, human, and
technical capacity.  She enquired about the sectors and activities in which the Government required
technical assistance, and about the priorities given to those activities.
30. Over the past years, Madagascar had considerably liberalized its external trade regime, and
demonstrated its commitment to opening its economy and to diversifying its trade relations via severalinitiatives and agreements for the promotion of multilateral, regional, and bilateral trade, such as
COMSEA, the Cross-Border Initiative, and the Indian Ocean Commission.  Several agreements,
notably the Cotonou Agreement, provided preferential and non-reciprocal market access for
Madagascar's products.
31. Even though Madagascar only recently became a participant in these agreements, the
Government endeavoured scrupulously to fulfil its obligations:  Madagascar was one of the few
COMESA countries that had adopted a free-trade zone within the required period, i.e., 31 October2000.
32. Madagascar had engaged in a process of simplification and reduction of tariffs and
elimination of most export and import restrictions.  However, tariff bindings on non-agricultural
products were minimal, and import taxation regulations were complex.  She enquired about measures
the Government intended to take in these areas.
33. The Government had encouraged liberalization in all sectors, and the progressive
disengagement of the State.  Agriculture was included in this process.  Agriculture, which constituted
an essential portion of Madagascar's export income, was a fragile sector, with fluctuating production
due to climatic conditions.  In addition, the sector was constrained by insufficient transportation and
marketing networks.
34. Madagascar had a strong advantage in the aquaculture sector, where the Government had
adopted a transparent and competitive system.  Gr eater transparency with respect to phytosanitary
measures might be helpful in overcoming restrictions imposed by importing countries on
Madagascar's fisheries exports.  She requested information about sanitary measures the Government
had taken to overcome the import bans imposed by the EU on Madagascar's fisheries products.
35. In addition to the abundant water resources, Madagascar was rich in natural resources, and
had good development potential in the mining and energy sectors.  She enquired about the main
components of the ongoing reform in the branch of electricity, and about the legislation the
Government intended to adopt to attract private in vestment to the mining sector.  The manufacturing
sector was still underdeveloped, but had grown in importance especially as a result of the considerableactivities in the export-processing zones (EPZs).  She requested information about the ongoing reform
of the legislation regulating the EPZs.
36. The services sector was the driving force behind Madagascar's economic recovery.  This
sector contributed more than half of the country's national wealth.  In 1997-98, the Government made
important efforts towards liberalization of the banking and insurance subsectors.  Madagascar was
among the first African countries that had partially opened the telecommunications industry to
competition.  She requested additional information about the reforms in telecommunications.WT/TPR/M/80
Page 9
37. Noting that Madagascar's limited GATS commitmen ts did not fully reflect the liberalization
efforts already undertaken in this area, she encouraged Madagascar to participate in the ongoing
GATS negotiations.
38. Madagascar had created an environment of healthy and fair competition, and had thus
promoted a more diversified and less vulnerable economy.  Foreign investors saw promising
opportunities in the textiles, fisheries, mining, telecommunications, and tourism branches, and
considered that restraints on the economy were outweighed by the benefits.  The challenges included
reduction of poverty, better enforcement of existing legislation, improvement of infrastructure,promotion of a more efficient and transparent administration, and support of small enterprises.  She
expressed her hope that the occasion of the TPR would create greater understanding of Madagascar's
essential needs for training and technical assistance, and that Madagascar would continue on the path
of reform, permitting greater integration into the world economy.  Coherence between
recommendations (by international organizations) for trade liberalization and for improvement of
public revenue was necessary.WT/TPR/M/80
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IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
39. The representative of Hong Kong, China noted that trade between his country and
Madagascar had grown at an annual rate of 8% between 1995 and 1999.  He commended Madagascar
on having simplified the tariff regime and brought down the tariffs.  He expressed concern that the
import tax, which was levied on over 80% of tariff lines at rates ranging up to 30%, might serve as a
protectionist measure for domestic products, and he urged Madagascar to consider further lowering it.
He also encouraged Madagascar to extend its tariff bindings to the non-agricultural sector so as to
provide more certainty to its trading partners.  He expressed pleasure over Madagascar's effortstowards meeting its TRIPS obligations by 2006, and commended the steps taken by OMAPI and
OMDA to introduce legislative amendments to prepare for this goal.  He stated that a project jointly
sponsored by Australia;  Bangladesh;  the EC and its member States;  Hong Kong, China;  Norway,
and Zambia had been launched to offer expert assistance to least developed country Members for the
review of their TRIPS legislation in 2006.  Substantive liberalization efforts had been made in a
number of services subsectors, such as finance, telecommunications, and transportation, and he
encouraged Madagascar to translate these efforts into binding commitments in the ongoing service
negotiations.
40. The representative of Canada commended Madagascar on the progress made in implementing
an economic reform programme, which had resulted in increased government revenue, contributed to
growth of over 3.5% per year, and helped to subs tantially reduce inflation.  He also applauded the
Government for the reforms and strategies pursued to reduce poverty.  Noting that trade liberalizationhad been central to Madagascar's economic reforms, he encouraged the Government's efforts in
establishing a national committee to follow WTO implementation (for example in areas such as
customs valuation);  to adapt its legal system to  WTO regulations;  and to promote public awareness
and understanding of the benefits of free and open trade and investment regimes.  He welcomed the
efforts to create an environment conducive to both domestic and foreign private investment.  Canadahad included Madagascar on the list of 11 countries that would benefit from a moratorium on bilateral
debt service payments effective January 2001, and once Madagascar had reached its completion point
under the HIPC initiative, Canada would completely remove Madagascar's debt from its books.  He
stated that his country had submitted written questions on various aspects of Madagascar's economic
reforms and trade practices and enquired about Madagascar's efforts to implement WTO obligationssuch as the valuation agreement.
41. The representative of the European Union stated that the EU attached particular importance to
its close political and economic relations with Madagascar.  Bilateral exchanges amounted to almost
€ 800 million a year.  The Cotonou Agreement allowed Madagascar preferential market access for a
large portion of its exports;  such preferential market access for the LDCs was important to theireconomic performance.  The Cotonou Agreement was the foundation for the stable and diverse
relationship between the EU and Madagascar.  The EU was among Madagascar's principal donors.
He enquired about specific measures the Government intended to put in place to create an
environment favourable to trade and investment, a nd the timetable for adoption of such measures.  He
requested further information about Madagascar's plans for making trade an integral part of the
country's development strategy, in particular with regard to the Poverty Reduction Strategy developed
in cooperation with the World Bank and other donors.  He requested information about steps taken byMadagascar to meet its obligation to implement the WTO Agreement on TRIPS by 2006.  Although
this was a priority for the Government, little progress had been made.  In the context of the upcoming
Ministerial in Qatar, the EU hoped to explore with the LDCs the possibility of a new round.
Madagascar had great development potential, and the country was well situated to take advantage of a
further developed multilateral trading system, also dealing with new issues, such as competition and
investment.  In general, the existence and enfo rcement of international trading rules benefitedWT/TPR/M/80
Page 11
economies such as Madagascar through transparency, predictability, and avoidance of excessive
regulations and unilateral actions, or other forms of protectionism.  Regarding the connection between
trade and the environment, he called for transparen cy and predictability to the benefit of Malagasy
exports, which were largely subject to sanitary and environmental standards.  On trade facilitation, the
EU believed that simplification of procedures woul d help small enterprises in developing countries
like Madagascar.  On investment, the EU's view was that clear and transparent rules on the
multilateral level would be conducive for international investors to locate activities outside traditional
zones, in countries with great potential like Madagascar.
42. The representative of Japan stated that the volume of trade between her country and
Madagascar amounted to approximately US$64 million in 1998.  Japan exported products such as
automobiles, and imported items such as prawns and vanilla.  There were several Japanese trading
companies in Madagascar.  She commended the Government for having removed all barriers to the
creation of a healthy and fair competitive environment.  Japan supported the chief objectives of
Malagasy policy – reduction of poverty, and permitting the commercial and private sectors to be the
driving forces in economic growth.  Japan had provided economic and technical assistance towardsthe economic development of Madagascar thr ough ODA (US$52 m illion in 1998).  She enquired
about the prospects of Madagascar expanding the product coverage of its tariff bindings, and the
reasons for the import tax levied on over 80% of tariff lines in addition to customs tariffs.  She also
enquired about the definition of “other taxes” levied at 250%.  Noting that Madagascar was revising
legislation concerning patents, trade marks, and copyrights, in preparation for meeting its WTOcommitments by 2006, she sought information on the main points of the revised legislation and on the
planned schedule for the legislative process.  She expressed appreciation for the plans to privatize the
air transport and telecommunications subsectors before the end of 2001.  Noting that Madagascar's
Schedule of Specific Commitments under the GATS covered only a few business services activities,
she stated that Japan was expecting Madagascar to pursue progressive liberalization, includingexpansion of the coverage of its commitments in the ongoing negotiations on trade in services.
43. The representative of Mauritius described the long-standing good relations between her
country and Madagascar as being based on the economic and cultural ties stemming from their close
geographical proximity.  Both countries participated in the Cotonou Agreement, and were members of
COMESA, the Indian Ocean Commission, and the Indian Ocean Rim.  Madagascar's potential in
terms of resources in mining, fisheries, and energy was considerable and should be developed in a
sustainable manner.  Madagascar's large debt servicing burden had prevented resources being
channelled towards the productive sectors.  Despite constraints, in the 1990s, Madagascar had
followed a policy of liberalization and privatization.  The services sector had benefited from this
policy and was now contributing approximately 52% of Madagascar's GDP.  Tourism, a majorsubsector, contributed approximately 16.8% of  GDP and employed around 16,000 persons.  The
Government's policies had benefited the subsector, and privatization of Air Madagascar and of the
airport authority would facilitate its growth.  Th e financial and telecommunications subsectors were
also rapidly developing.  The 1996 law had permitted reform of the financial services subsector and
encouraged the establishment of several financial institutions, including foreign-owned banks.  The
Malagasy Telecommunications Company (TELMA) was partially privatized, with 66% of its capital
still held by the State.  In 1996, Mauritius contributed to the establishment of a direct telephone linebetween the two countries.  Mauritius had previously collaborated with Madagascar in the
establishment of export-processing zones for the manufacturing sector, in particular with respect to
textiles.  Madagascar produced a variety of agricultural products, including vanilla, pepper, cloves,
and cocoa.  Nonetheless, Madagascar was not self-sufficient in its agricultural production and the
Government's goal of securing the food supply  should be supported.  In addition, Madagascar's
objectives with respect to rural development should be supported.WT/TPR/M/80
Page 12
44. The representative of the United States stated that his country and Madagascar had developed
friendly relations and strong economic ties that were being strengthened even further due to a rapidly
growing commercial relationship.  U.S. imports of manufactured products, including textiles, wereestimated to exceed US$100 million in 2000.  Expanded trade with Madagascar and other
sub-Saharan African countries was a goal of the African Growth and Opportunity Act (AGOA) of
2000.  In 1998, the U.S. Overseas Private Investme nt Corporation signed a bilateral Investment
Incentive Agreement with the Government of Madagascar.  In recent years, U.S. economic assistance
to Madagascar had totalled more than US$20 million annually.  While Madagascar was an LDC it hadmade progress towards increasing economic growth, and since 1997, economic growth had
outstripped population growth.  The policies of trade liberalization and privatization had been
important towards reaching these goals.  Madagascar had simplified its tariff structure and reduced
average tariff rates, and in 2000, had begun using the valuation method based on the transaction value
for imports.  Madagascar's continued progress in economic reform had placed the country in line for
consideration for additional debt relief under the enhanced HIPC Initiative.  The United States
supported the objective of the Government that trade policy should contribute to poverty reduction byallowing the commercial and private sectors to be the driving force in economic growth.  This
trade-related capacity building was important for increased trade liberalization in the LDCs.  The
United States expected to spend approximately US$5 million on technical assistance in WTO-related
issues for Africa.  He remarked that the legal and regulatory environment could be a source of
frustration for foreign investors in Madagascar.  Reforms were occurring in the area of customsprocedures in Madagascar, a good customs system could be a tool in attracting and increasing trade
and investment.  He urged Madagascar to notify the WTO of its enquiry point with respect to the
Technical Barriers to Trade (TBT) Agreement, and to advance the implementation and administration
of the TBT Agreement.  He encouraged Madagascar to submit a request for technical assistance to the
TBT Committee (if such assistance was needed to meet the TBT obligations), to increase its GATS
commitments, and to lower rates of taxation on trade.  He commended the Government's privatization
programme and urged the Government to complete the privatization of Air Madagascar and Telecom
Malagasy before the end of 2001.
45. The representative of India found the timing of the Trade Policy Review of Madagascar very
appropriate as it coincided with the occurrence of WTO seminars on the Integrated Framework, and
on the link between technology, trade, and development.  A TPR of a country like Madagascar
allowed WTO Members to understand how effectively the trade policies of LDCs were contributing
to the sustained growth of their economies and the welfare of their peoples.  He enquired about
Madagascar's experience with implementation of the Integrated Framework and views on making it
more effective.  The economic reforms undertaken by Madagascar in recent years were far-reachingand truly impressive.  The Government had withdrawn from the production and distribution sectors,
retaining only a limited supervisory role.  All restrictions on exchange and current external
transactions had been abolished.  Major initiatives had been taken to promote the tourism, energy,
mining and transport branches, while at the same time preserving the environment.  Foreign
investments were no longer subject to regulatory restrictions, and foreign and national investments
were subject to the same terms and conditions.  The reforms had helped promote macroeconomic
stability and had placed Madagascar on the path towards higher and sustainable growth in real percapita income.  Despite these achievements, Madagascar remained a poor country due to its high
indebtedness.  He expressed his country's hope that inclusion in the HIPC Initiative would improve
Madagascar's situation.  He asked the Malagasy delegation to elaborate on the statement that the
country needed substantial technical assistance.  He  stated that, considering the country's climate, it
was important for Madagascar to diversify its export base.  It was important for Madagascar to benefitfrom technological advances being made around the world.  Bilateral trade between India and
Madagascar amounted to approximately US$12 million in 1998.WT/TPR/M/80
Page 13
46. The representative of Norway recalled the excellent cooperation between his country and
Madagascar, and commended the Government of Madagascar for clearly underlining that the chief
objective of its trade policy was to contribute to reduction of poverty.  He agreed that the commercialand private sectors could play important roles in economic growth.  He encouraged the Government's
efforts towards good governance, investments, infrastructure development, education, and training,
and reconfirmed his country's commitment and continuing support in this regard.  Trade needed to be
integrated better into general development activities.   Norway had been actively involved in efforts to
further strengthen the Integrated Framework.  Madagascar had pointed to its lack of capacity toimplement the WTO agreements and decisions;  this underscored the need for securing the financial
basis for WTO's technical cooperation activities.  He requested further  information and enquired
whether the Customs Valuation Agreement had been implemented in November 2000.  He
commended Madagascar's objectives for the fisheries subsector, and for the reform recently
introduced in the shrimp management system, as practices of sound natural-resources management.
He enquired about the prospects for strengthened regional cooperation and the effects of such
cooperation on the multilateral system.
47. The representative of Malaysia remarked that Madagascar had achieved positive rates of
growth and declining inflation, despite the existence of high external debt, hostile climatic conditions
and large fuel price increases.  These economic improvements were more encouraging given the poor
external environment, low commodity prices, and declining terms of trade.  Madagascar had potential
to further strengthen its economic growth.  She took note of the policies in place to strengthen exportgrowth and investment, and stated that the establishment of export-processing zones and a conducive
investment regime were attracting investment, including from Malaysia.  She encouraged the further
strengthening and diversification of the export base in the manufacturing sector.  Malaysia believed
that the international community, the international financial institutions, and the WTO had more to do
to assist Madagascar in its efforts towards greater economic development.  She pointed to the numberof specific needs for technical assistance mentioned in the Report, including those relating to the
implementation of the WTO Agreements.
48. The representative of Mozambique commended Madagascar on the progress made in the
programme of economic reforms and the implementation of progressive trade liberalization.  He
expressed his country's pleasure that Madagascar had formulated a trade policy intended to contributeto reduction of poverty and provide better living standards to the Malagasy people.  Madagascar's
participation in regional and bilateral initiatives would contribute to the establishment of strategies for
poverty reduction and would strengthen the efforts of cooperation and regional integration.  He
stressed Madagascar's needs for continued technical assistance in a wide range of trade-related areas
in order to meet its WTO obligations.
49. The representative of Djibouti noted that the Malagasy delegation was large;  this indicated
the importance Madagascar attached to the rules of international trade administered by the WTO.  He
stated that only a few questions should have been submitted to Madagascar, as an LDC;  Djibouti was
familiar with the economic and political situation in Madagascar.
50. The representative of Gabon expressed her support for the Malagasy delegation, and stated
that it was important to ensure that the country’s technical assistance needs were fully met in order to
help Madagascar develop.WT/TPR/M/80
Page 14
V. REPLIES FROM THE REPRESENTATIVE OF MADAGASCAR AND ADDITIONAL
COMMENTS
51. The delegation of Madagascar provided written responses to advance written questions and to
questions raised during the first day of the meeting.  Three topics had emerged from these questions:
(1) economic environment;  (2) trade policies by measure;  and (3) sectoral policies.
(1) ECONOMIC ENVIRONMENT
52. The representative of Madagascar presented his delegation’s responses to questions related to
the first topic.  The Chairperson invited the discussant to comment on these replies, and then opened
the floor for comments from other participants.  The Chairperson stated that the revised Government
Report was available.
53. The discussant commended the Government of Madagascar for having identified the
companies that would be privatized by 2002, and noted  that this list included the insurance industry.
She encouraged the Government to inform the WTO Se cretariat of the elements of the new legislation
on the industrial zones, as soon as they became known.  Further information about the leasehold
regime would be welcome, in particular with respect to its effect on investment, and how theGovernment and the autonomous provinces would share responsibility in this area.
54. The representative of the European Union noted with interest and satisfaction that the
Government had well-defined policy goals and had developed detailed programmes to attain those
goals.  He expressed the EU's support for the goals of economic development and poverty reduction.
Madagascar remained dependent on customs duties as the primary source of public revenue.Measures had been adopted and implemented in this area, including measures to strengthen
institutions and reorganize the relevant administration.  Noting that the Government was attempting to
bring the informal economy into the formal, regulated sector, he sought further information about the
measures and incentives adopted in this regard.  He also enquired about the measures adopted to
lessen dependence on customs revenues.  With respect to competition issues, he suggested that theGovernment should ensure that an appropriate frame work for enforcement be put into place together
with the new legislation.
55. The representative of the United States stressed her country's interest in the Government's
responses regarding privatization.  She noted that privatization of state-owned enterprises had
contributed to an increase in FDI of 260%, and enquired whether the Government intended to useprivatization to attract higher levels of FDI.  Sh e sought information about the Government's plan to
establish a national committee to follow implementation of the WTO Agreements.
56. The representative of Canada encouraged the Government of Madagascar to improve
interdepartmental and interagency coordination of trade policies, and expressed his country's interest
in learning more about the national committee to follow implementation of the WTO Agreements.
57. The representative of Madagascar said that his Government was in the process of updating the
legislation governing export-processing zones, and that once the revised statute had been enacted it
would be made available to the WTO Secretariat.  With respect to the leasehold regime, it was the
Government's opinion that the current regime was satisfactory to most investors.  Leases were
transferable and could be used as collateral and as security for mortgages.  The Government had
traditionally been very centralized.  The purpose of establishing the autonomous provinces was to
enhance decentralization and to bring the decision-making process closer to the population.  Someautonomous provinces had established assemblies and had held elections.  The Central Government
would retain authority over security, interna tional relations, and defence issues, and nationalWT/TPR/M/80
Page 15
legislation would prevail over locally adopted legislation.  Elements of this transfer of authority and
competence to the autonomous provinces remained to be spelled out.  In addition to sharing in the
responsibility, the provinces would also share in  financial resources, both from the national budget
and from taxes levied locally.  A high percentage of public revenue was derived from customs duties;
the Government had adopted measures to increase revenue from other sources, such as taxes on
corporations and investments.  Measures were also being adopted to reduce customs charges.  A
significant portion of economic activity occurred in the informal sector;  the Government had adopted
measures to encourage people to register and formalize.  The Government had updated the law oncooperatives so as to provide benefits to small enterprises that organized into cooperatives.  The
Government was in the process of promulgating a new law on competition and expected to present it
to the National Assembly in May 2001.  The Government had established agencies, such as OMERT,
with responsibility for the regulation and reform of sectors to be privatized because it believed that
sectoral reform was necessary to ensure successful privatization.  The Government encouraged the
participation of nationals, but recognized that foreign investments were necessary, especially in
connection with privatization of large enterprises.  He remarked that consultations in each ministryand agency involved in trade policies were ongoing, and that the Government hoped to establish the
relevant national committee by the end of 2001.
(2) T
RADE POLICIES BY MEASURE
58. The representative of Madagascar presented the replies of his delegation to questions under
the second theme.
59. The representative of Canada encouraged Madagascar to identify and prioritize its technical
assistance requirements.  He enquired about Madagascar's experience in applying the Customs
Valuation Agreement, and whether minimum values were still applied to certain commodities.  He
expressed his country's interest in learning about what steps Madagascar was taking towards
transferring responsibility for preshipment inspection (PSI) to the national customs administration.He encouraged Madagascar to become at least an observer to the Plurilateral Agreement on
Government Procurement.
60. The representative of the EU welcomed Madagascar's adoption of the transaction value for
customs valuation purposes.  He emphasized that the goal should be to strengthen customs capacities
so as to eliminate PSI eventually.  He suggested  that if Madagascar's PSI contract was to be
continued, it should contain progressive phasing-out provisions and provide for training of Malagasy
customs officials by the contracting company.  He  encouraged Madagascar to become involved with
the WTO programme on trade facilitation as a forum for discussion of experiences and difficulties in
implementing reform programmes, and for identification of capacity building needs.
61. The representative of Japan commended Madagascar for its efforts in implementing the
Customs Valuation Agreement and for restructuring the tariff system.  She enquired whether
minimum import prices were accordingly abolished, and about the prospects of Madagascar
expanding the product coverage of it tariff bindings.  She also enquired about the purpose of
Madagascar's high tariff rates and high levels of other duties.
62. The representative of the United States expressed her appreciation for the Government's
efforts in drafting new legislation to satisfy Madagascar's TRIPS obligations.  She requested
additional information on Madagascar's timetable for implementation of the WTO Agreement onTRIPS.
63. The representative of Madagascar stated that minimum import prices were applied as a
transitional measure and as part of the process of strengthening institutions in the area of customsWT/TPR/M/80
Page 16
valuation.  With respect to PSI, the Government was in the process of assessing its experience so as to
determine whether to continue or eliminate PSI requirements.  It was the Government's intention to
offer importers a diversity of services through PSI.  On intellectual property protection, he stated thata team from WIPO would soon assist the Governme nt in drafting TRIPS-compliant legislation.
Malagasy customs duties were not higher than those applied by other members of the regional
agreements to which Madagascar belonged.  Madagascar would, at the appropriate time, expand its
schedule of bindings.
(3) S
ECTORAL POLICIES
64. The representative of Madagascar presented the replies of his delegation to questions under
the third theme.
65. The discussant stated that sanitary and phytosanitary measures were important both with
respect to imports and exports.  Exports to some markets were subject to very strict rules.  She noted
that identifying the requirements for technical assistance and cooperation in this area was vital, given
the structure of Madagascar's economy and exports base.  She commended the Government for its
policy of liberalizing trade in services, and encour aged Madagascar to become involved in, and to
follow, the ongoing negotiations on trade in services.  She noted that the Government was in the
process of liberalizing the air transportation, telecommunications, and energy industries.  Formation
of the national committee to follow implementation of the WTO Agreements was important because it
would establish a consultative process.
66. The representative of Canada encouraged Madagascar to expand its GATS commitments,
particularly in the areas that already had been libera lized;  this would attract further investments.  The
telecommunications industry was important because it served as an input for other sectors.  He
enquired whether the Government had established a timetable for reducing its ownership stake in
TELMA, and whether the Government intended to establish an independent body to regulate this
sector.
67. Recognizing that his comment was beyond the third theme, the representative of the EU
enquired about Madagascar's views and experience with the multilateral trading system, and its
position on a new round of trade negotiations.
68. The representative of Madagascar stated that his Government had begun the process of
liberalization and privatization of the air transpor tation, telecommunications, and energy industries.  It
was the Government's policy to establish regulato ry structures and to reform each sector before
privatizing the companies operating in these areas.  Regulatory agencies had already been established:
ADEMA, in the area of civil aviation;  the Hydrocarbons Office;  and OMERT, in the area of
telecommunications.  OMERT had been in operation for almost a year.  The Government anticipated
completing the tender for privatization of TELMA by the end of March 2001;  the World Bank wasinvolved with this process.  He remarked that Madagascar's views on a new round of trade
negotiations would evolve within the framework of the WTO Africa Group.
69. The representative of Japan sought further clarification regarding the application of other
duties in addition to customs tariffs.
70. The representative of Madagascar stated that the country's tariff bindings applied only to
agricultural products and certain chemical commodities, and that the bound tariff on these
commodities was 30%.  He explained that import taxes, other than customs tariffs, were bound at theceiling rate of 250%, and applied only to some of these items.  For other commodities, the taxes were
not bound.  In practice, the taxes were not applied at the level of 250%.WT/TPR/M/80
Page 17
71. The discussant remarked that this was a question of coherence between structural adjustment
programmes carried out by the IMF and the World Bank, and the overall economic policy;  this was a
very complex issue.  In some instances, operators could come to believe that products entering into
Madagascar were taxed at 250%.  She stated that the issue of coherence was very important and that
the prevailing policy had to be the one developed jointly by the IMF, the World Bank, and the WTO.
It was paradoxical that one international organization could be challenging a policy adopted under the
auspices of another international organization.  She encouraged members to support the coherence
policy, and noted that the WTO's General Council attached ever greater importance to the economicdimension of trade policy and development issues.
72. The Chairperson stated that Madagascar's commitments in terms of bindings of tariff and
other duties and charges were presented in the Secretariat's Report, pages 26 and 29, paragraphs 15,
16, and 19 (WT/TPR/S/80).
73. The representative of Nigeria stated that his country had noted the steps taken by the
Government of Madagascar to improve the standard of living of its people through its programme of
trade liberalization and implementation of WTO obligations, privatization, and diversification of theproductive base of the economy.  He urged the Government to make further efforts towards providing
a competitive environment that would enhance the country's potential and encourage foreign
investment.  He expressed his country's admiration for the new method of rice production, and its
interest in learning more about Madagascar's experiences in this regard.WT/TPR/M/80
Page 18
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
74. We have had a thorough and constructive discussion of the trade policies of Madagascar.
Members were impressed by Madagascar's recent strong economic performance, which theyattributed to the strengthening of its market-orien ted reforms, including trade liberalization.  Members
commended Madagascar on its interim Poverty Reduction Strategy Paper (PRSP) and sought
clarification on the mainstreaming of trade in the PRSP.  They noted that Madagascar's debt relief
under the HIPC initiative would further assist its macroeconomic situation.  Some concern was
expressed about the pace of the privatization process and about restrictions on land ownership, whichwere negatively affecting foreign direct investment, particularly in the tourism subsector.  Members
encouraged Madagascar to continue the reform proce ss so as to allow it to fully benefit from its rich
resource base and enormous potential.
75. Members appreciated Madagascar's active participation in the multilateral trading system.
Some Members urged Madagascar to join them in their support for the launch of a new round of
multilateral trade negotiations.  Members called upon Madagascar to improve commitments under the
GATS, particularly in areas such as telecommunications, transportation and tourism, and to meet itsWTO notification requirements.  Members expressed hope that a revitalized Integrated Framework, in
which Madagascar would be an early participant, would yield beneficial results in meeting
Madagascar's technical assistance needs and its multilateral commitments.  Members were supportive
of Madagascar's initiatives towards regional and bilateral agreements to expand its trade, but urged
Madagascar to ensure that such agreements remain ed consistent with the multilateral trading system.
76. Members urged Madagascar to strengthen its domestic process of trade policy coordination
and were encouraged by Madagascar's intention to establish a national committee on WTO matters.
Members commended Madagascar's reduction of import duties, although it was acknowledged that
Madagascar might encounter problems of policy coherence given other recommendations to
maximize revenue from import levies.  Some concern was expressed about the high level and varietyof additional import taxes.  Suggestions were made that Madagascar increase the number of its tariff
bindings on non-agricultural products.  Members noted that Madagascar had just adopted the WTO
provisions on customs valuation and enquired about implementation difficulties it might face.
Questions were raised about preshipment inspection, quantitative restrictions on imports of products
such as vanillin and precious stones, and about export promotion, including the export processingzone and export credit.
77. Members noted that Madagascar's economic performance had suffered somewhat because of
its significant reliance on the agriculture sector which had faced serious climatic difficulties.  In
addition, some Members pointed out that Madagascar's agricultural exports could be expanded if
markets were more open in developed countries.  Noting that aquaculture was expanding rapidly inMadagascar, Members enquired about measures taken by Madagascar following the prohibition by
foreign countries of some of its exports, mainly shrimp, on sanitary grounds.  There was also
recognition that Madagascar might further exploit non-reciprocal preferential treatment provided by
developed countries to expand its exports if it improved its infrastructure and the competitiveness of
its manufactured products, mainly textiles.
78. Members also sought further clarification on a number of issues, including:
(i) government procurement and eventual participation by Madagascar in the Plurilateral
Agreement on Government Procurement;
(ii) adoption of new competition legislation;WT/TPR/M/80
Page 19
(iii) implementation of the TRIPS agreement in January 2006;
(iv) legislative and structural reforms in the mining and energy sector;  and
(v) structural reforms in the services sector, especially in banking and insurance services.
79. Members appreciated the responses provided by the delegation of Madagascar to most
questions raised during the meeting.
80. In conclusion, it is my view that this Review has given Members an opportunity to better
understand the economic challenges facing Madagascar.  Members were encouraged by Madagascar's
economic performance and were optimistic about its economic prospects.  Members encouragedMadagascar to maintain both the pace and the direction of its reforms, and urged that its bilateral and
regional arrangements be WTO-consistent.  In my personal capacity, I advocate that all Members
support Madagascar in its efforts.  In this respect, we should pay particular attention to Madagascar's
request to the Membership for technical assistance.WT/TPR/M/80
Page 21
ANNEX I
ADVANCE WRITTEN QUESTIONS BY MEMBERS
HONG KONG, CHINASecretariat Report (WT/TPR/S/80)
Preshipment Inspection, p. 25, para. 5
It is mentioned that Madagascar will not renew its preshipment inspection contract with
Bureau Veritas Corporation when it expires in April 2001.  Could Madagascar share with us its new
institutional, and if applicable, operational arrangements for inspection on imports subsequent to theexpiry of the contract?
Insurance Services, p. 49, paras. 71-75
It is noted that foreign participation in insurance services is not active in Madagascar and that
Madagascar has planned to privatize the parastatal insurance company (National Insurance
Company).  We would like to know more about the pr ivatization plan, in particular whether foreign
participation would be allowed.
Tourism, p. 50, para. 77
It is mentioned that restrictions on land ownership form a kind of barrier for foreign investment in
tourism while Madagascar is attempting some facilitative measures in this respect.  Would
Madagascar provide more information about the restrictions and the facilitative measures?
Furthermore, we would like to know if there is any plan to lift the restrictions.
Telecommunications Services, p. 52, paras. 84-86
Except for mobile telephone services, prices of all telecommunications services are subject to
approval by the government.  Having regard to the various liberalization efforts made in the sector,
would Madagascar also consider removing/relaxing intervention in this respect?
CANADA
Secretariat Report (WT/TPR/S/80 )
Summary Observations
(4) para. 19, and (5) para. 22
The Secretariat Report states that Madagascar's  commitments under the GAT S, limited to certain
business activities, do not reflect its liberalization efforts in services.  It also states that improvement
of the low level of Madagascar's multilateral commitments, mainly under the GATS, would createconfidence in the irreversibility of the reforms, render them more credible, and enhance Madagascar's
adherence to the WTO principles.  Does the Government of Madagascar intend to make specific
bindings in GATS-related sectors where liberalization is currently under way, e.g. air transport,
financial services, consultancy work, tourist activities and telecommunications?  If yes, please advise
what sectors.  If no, please explain why not.WT/TPR/M/80
Page 22
I(1) paras. 5-7
According to para. 5, Madagascar is one of the most indebted countries in the world.  The debt
servicing requirements are enormous obstacles to Madagascar's economic development.  Has theGovernment formulated a long-term plan to reduc e its debt burden?  If yes, please explain.
I(3)(i), Tables I.4 and I.5
According to Table I.4 (Imports by major commodity group, 1990-99) and Table I.5 (Exports by
major commodity group, 1990-99), imports of textiles are at the same level in 1999 as they were in
1990;  however, during the same period, exports of textiles increased 513%.  Has Madagascarconcentrated its efforts on developing its textiles producing capability over the past decade?  What
portion of these exports is textiles, and which is apparel?
Does Madagascar intend to further develop its textiles producing capability in order to benefit from
the U.S. Trade and Development Act 2000 beyond its first four years of implementation (after which
point LLDCs will no longer be granted the provision that allows them to use third country textiles)?
If yes, please explain Madagascar's plans to develop its textiles producing capability?
II(3) paras. 16-18
According to paras. 16-18, Madagascar does not have any formal, enunciated trade policy objectives.
Madagascar's trade policy is presently guided by WTO rights and obligations.  We are also aware that
there are no formal coordinating bodies for the formulation and implementation of a trade policy at
this time.  A National Committee responsible for the monitoring of WTO Agreements is supposed to
be established in Madagascar.  Will the National Committee also help formulate Madagascar's tradepolicy objectives?  If no, which government depart ment or agency will coordinate the process of
formulating and implementing Madagascar's trade policy?
II(4)(iv) paras. 26 and 29
According to paras. 26 and 29, in the export-proc essing zones (EPZs) 50% of the companies are
operating in the textiles and apparel branch.  Investment in the EPZs comes primarily from:  France;Mauritius;  India;  Hong Kong, China;  and Malaysia.  It is possible that some of the appeal for
investing in Madagascar comes from tariff advantages granted to exporting LLDCs.  We notice that
five of the principal investors are also important textiles and clothing producers who face quotas by
major importers, so it is possible that in an effort to bypass the quota system, exporters from these
countries are investing in, and then exporting from, Madagascar.  How does the Government ofMadagascar see the elimination of quotas by 2005 affecting its EPZs?  Once all textiles and clothing
are under GATT rules, does Madagascar expect to be competing with its EPZ investors for export
markets?
III(2)(viii) para. 34
According to para. 34, Madagascar is neither a signatory nor an observer to the WTO Plurilateral
Agreement on Government Procurement.  What is th e intention of Madagascar with respect to both
accession to the WTO Agreement on Government Procurement and seeking status as an observer to
the Agreement?WT/TPR/M/80
Page 23
III(4)(i) paras. 58-60
According to para. 58, the Government of Madagascar has introduced a privatization programme
which includes all economic sectors.  The programme encompasses 136 companies slated to beprivatized between 1997 and 2002.  At the end of June 2000, 46 enterprises were earmarked either for
privatization or liquidation.  Considering that it has taken four years to earmark 46 enterprises for
privatization or liquidation, please explain how Madagascar plans to meet its goal of privatizing 136
companies within the next two years.  Since June 2000, how many additional companies have been
earmarked for privatization?
According to para. 58, the privatization proces s has been implemented in order to promote
competition in a regulatory and institutional envi ronment.  We are also aware that the Government
has created a number of special funds to attenuate the social impact of privatization in Madagascar.
How is the Government of Madagascar assessing the socio-economic impact of the privatization
programme?  How are these special funds being alloca ted?  What agency or department is monitoring
the disbursement of these funds?
IV(5)(iv) para. 84
According to para 84, the Government began the liberalization process in telecommunications,
seeking to improve services by restructuring the subsector and favouring development of private
initiatives.  In view of the government's recognition that services would be improved by favouring the
development of private initiatives, has consideration been given to the benefits of making specific
commitments on telecommunications under the GATS, and undertaking the obligations contained inthe Reference Paper on Telecommunications?
According to para. 84, 66 percent of Telecom Malagasy (Telma) is still held by the state.  In view of
the Government's intention to maintain a stake in Telma, is the Government considering creating an
independent telecommunications regulatory authority?
EUROPEAN UNION
Government Report (WT/TPR/G/80)
P. 5, para. 9
It is indicated that the Government "will create a favourable environment for investment and trade".
Is there a timetable relating to specific measures?
P. 12, para. 60
Can the Government inform what steps are still to be taken and when it expects to ratify COMESA
protocol on free movement of people?
P. 16, para. 99
What is the status of mainstreaming trade in Madagascar's development strategy?  In particular, are
trade issues part of the Poverty Reduction Strategy, which is the basis for co-operation with the WorldBank and other donors?  What are the short- and medium-term priorities for trade-related capacity
building measures?  In this context, what priority does the Government give to the Integrated
Framework and which Government bodies will be  primarily designated for its implementation?WT/TPR/M/80
Page 24
Secretariat Report (WT/TPR/S/80)
I(2) p. 4, para. 12
Madagascar has liberalised capital movements in 1996.  If this was the case, why does a distinction
between convertible and non-convertible accounts still exist, why are convertible accounts only
available for foreigners for a limited period of time, and why is it necessary to provide documents
explaining the need for foreign currency if one wants to exchange FMG?
Under the regional agreement CO MESA (Common Market for Eastern and Southern Africa),
Madagascar is supposedly preparing since 1992 for a monetary union with other Eastern and SouthernAfrican states that is supposed to be completed in 2025 (WT/TPR/S/80, p. 25).  What kind of
preparations have been realised so far?
I(2) p. 3, para. 11
What are Madagascar's experiences with the strengthening of the tax and customs administration and
what further steps for reforming customs administration are planned?
II(4)(ii) p. 12, para. 20
In which way does the Government address the (negat ive) impact of limitations of land ownership for
foreigners on foreign direct investment, especially in the tourism sector?
II(5)(ii) p. 19, paras. 61-62
States that problems in implementing WTO agreements remain due to a lack of human as well capital
resources.  At the same time Madagascar has entered into or is in the process of entering into a
number of regional agreements.  Is there any analysis on the economic impact of these initiatives?What are consequences in terms of human resources and technical capacities in key ministries and
needs for capacity building?  How far is the private sector involved in the setting up of these regional
trading arrangements?  The EU would like to ob tain more information on how Madagascar consults
with civil society, including NGOs, in order to define its trade policy.
Page x, para. 22
The Secretariat report as well as the Government report confirm that technical assistance is viewed by
Madagascar as essential for ensuring full compliance with its WTO obligations.  It would be useful to
know if Madagascar has undertaken efforts to spec ify and inventory its Technical assistance needs in
the various areas of WTO activities.
III(iii) Tariffs
The EC notes that Madagascar's simple average applied tariffs, inclusive of import tax, are 16.2%.
Madagascar has bound customs duties on all agricult ural products, but only on chemical products (HS
Chapters 28 and 29) in the non-agricultural sector.  Would Madagascar agree that the predictability of
its tariffs would be enhanced by binding the re maining non-agricultural tariff lines?  What are
Madagascar's intentions in this respect?
In 1999, Madagascar simplified its tariff structure by organising rates into four tariff bands (5%, 15%,
25% and 30%), compared with 69 different rates in 1998.  Could Madagascar please explain the
reasons for doing this and indicate what the benefits have been?WT/TPR/M/80
Page 25
III(iii) para. 16
The Government intends to eliminate the maximum rate of 30% in the future.  Could Madagascar
please confirm (a) whether this means that the top applied tariff rate would be 25%, and (b) when itintends to eliminate the 30% rate.
What will be the consequences of Madagascar implementing COMESA's Common External Tariff in
2004 (a) will tariffs decrease or increase (overall and by sector), (b) will this mean that Madagascar
reverts from tariff bands to a more complicated tariff structure?
Customs valuation
In the absence of knowledge from the side of the EU of whether Madagascar has complied with the
requirement of Article 22.2 of the WTO Agreement on Customs Valuation as regards notification of
legislation, we would be grateful if Madagascar could confirm that they now fully implement the
WTO Customs Valuation Agreement or – if that is not the case – if they have encountered any
unforeseen difficulties in implementing this Agreement.
Summary Observations
(4) p. ix, para. 17
It is mentioned that marketing boards for agricultural products have been abolished on virtually all
products.  Could the Government clarify what is meant by the wording, "the vacuum left by the
boards has not been filled"?
Intellectual Property Rights
As a least developed country Madagascar benefits from the special and differential treatment in
TRIPS agreement implementation afforded by art. 66.1.  Nevertheless, in the perspective of the
implementation of the TRIPS agreement by 1st January 2006, it would be appreciated if Madagascar
could inform us of any concrete steps to be undertaken in order to achieve this objective.
JAPAN
Secretariat Report (WT/TPR/S/80)III(2) p. 26, paras. 12 and 14, Customs valuation
Although the 5 year transitional period under Article 20 of the Customs Valuations Agreement ended
in November 2000, Madagascar did not request for an extension of its transitional period.  Does this
imply that Madagascar has already abolished the method of customs valuation based on the Brussels
definition of valuation (BDV), as well as minimum import prices system?
P. 26, para. 15, Tariffs
The Report states that Madagascar levies an import tax on over 80% of tariff lines in addition to the
customs tariffs.  In this context, kindly define the exact signification of "an import tax" (i.e. its
purpose, the reasons for different categorization between customs tariff and an import tax, etc.).WT/TPR/M/80
Page 26
P. 29, para. 19
The Report states that Madagascar bound 23.7% of total tariff lines.  Please explain the perspective
for expanding the product coverage of tariff bindings.
The Report states that Madagascar bound duties at a ceiling rate of 30%, and other taxes at 250%.
Please define "other taxes".  Does "other taxes" include "import tax" as referred to in paragraph 15?
Why is the rate of "other taxes" considerably higher than "customs duties"?
(3) p. 33 para. 46
Please explain, in concrete terms, the system of Ma dagascar's export credit.  Why must local exporters
pay high charges (commission) in Madagascar, although exports are pre-financed by foreign
importers, as mentioned on the third line of this paragraph?
(4) p. 36, para. 74
The Report states that "both OMAPI and OMDA are currently revising legislation with respect to
patents, trade-marks, and copyrights in preparation for meeting Madagascar's WTO commitments by
2006".  Kindly give a detailed explanation concerni ng the main points of the revised legislation as
well as the planned schedule for the legislative pr ocess.  Japan would particularly like to know how
the protection of undisclosed information as well as the layout-designs (topographies) of integrated
circuits is ensured by the revised legislation.
MAURITIUS
Could Madagascar indicate the measures which have been taken by the competent authorities to
remove tariff and non-tariff barriers in the context of intra regional trade?
Does Madagascar actually provide duty-free trea tment to goods origina ting from COMESA Member
States?  If not, could it inform of measures being envisaged to comply with Madagascar's COMESA
obligations?
Could Madagascar provide a list of Sanitary and Phytosanitary standards, regulations and practices
applicable in the country?  Could it also provide a list of technical standards applicable inMadagascar?
Does Madagascar apply the same taxes on imported goods and "like" locally produced goods or are
such products subject to different taxes.
UNITED STATES
I(1) para. 2
The Secretariat Report notes, the underdevelopment and inefficiency of Madagascar’s manufacturing
sector suggests that there are substantial efficiency (and employment) gains to be realized from
further trade liberalization.  What steps is the Government taking or planning to take for further
liberalization and greater efficiency in the manufacturing sector?
The Secretariat Report notes that the formal sector “suffers” from the existence of a large informal
sector.  Does the Government have any strategy for bringing the informal sector more into the formal
economy by the lowering of regulatory and fiscal burdens or increasing services?WT/TPR/M/80
Page 27
Para. 3
The Secretariat Report notes that the HIV/AIDS ep idemic is relatively nascent in Madagascar which
provides the Government a unique opportunity for effective intervention.  We are highly supportive ofMadagascar’s  efforts on HIV/AIDS and would appreciate learning more about the Government’s
plans in this area.
Para. 7
Madagascar qualified for additional debt relief to cushion the adverse effect of its foreign debt under
the Heavily Indebted Poor Countries (HIPC) Initiative.  The Secretariat Report states thatMadagascar’s  inclusion in the HIPC programme is, in part the result of continued progress in
implementing the authorities medium-term programme and of stringent measures laid down by the
World Bank and the IMF.  What does Madagascar intend to do to make further progress on economic
reforms?
(2) para. 11
While we congratulate the authorities on their significant achievement in bringing inflation down
from 49% to 7.6%, we are concerned at the very low level of domestic savings (5% in 1999) –implying a very low level of investable funds.  Do the authorities have a strategy for increasing the
savings rate?
(3)(ii) Trade in services
The Secretariat Report notes that the services sector was one of the engines of the 1997/98 economic
recovery.  What does the Government think can be done to continue to encourage further growth inthe services sector?
(4) para. 21
The Secretariat Report notes that privatization of state-owned enterprises contributed to a substantial
increase in foreign direct investment in 1999 by n early 260%.  Does the Government plan to continue
to attract this higher level of  foreign investment through privatization?
(5) para. 22
What steps are being taken or planned to increase the efficiency in the domestic marketing chain to
boost food exports?
II(2) para. 10
Is there a timetable for the establishment of th e national committee to follow the implementation of
the WTO agreements?
(3) para. 18
The Secretariat Report notes Madagascar is committed to the process of regional integration.  It also
states that areas earmarked for Madagascar include seafood, wood, building materials and food
products.  We would appreciate clarification of what is meant by these earmarks.  How will it affectdomestic policies?  How does Madagascar intend to promote domestic production of these goods by
the private sector?WT/TPR/M/80
Page 28
(4)(ii) para. 20
We were pleased to read that the Government is committed to permitting foreign investors to enter
into long-term leases of land, since this should he lp encourage investment.  We also recall, however,
that in some other East African countries, restrictions on transfer-ability of leaseholds acts as a
constraint on credit, since leaseholders – whether foreign or domestic – cannot pledge land as
collateral for loans.  Is this a problem in Madagascar, and if so, does the Government plan any
changes in this area?
(iii) para. 24
The Government has been making efforts to encourage the process of reform in the mining sector and
attract foreign investment.  When is the Govern ment planning to enact new mining legislation?
(5)(i) para. 33
The Secretariat Report states that familiarity with the WTO agreements is generally limited to the
Ministry of Trade and that general awareness and understanding of the Agreements and their impact is
not widespread within the Malagasy public and private sectors.  What is the Ministry of Trade doing
to share its understanding with other elements of Madagascar society?
(ii) para. 38
The Secretariat Report notes that in the context of this Trade Policy Review a WTO mission
undertook an assessment of the technical assistance that could be provided on a long-term basis.
We think that such efforts to incorporate technical assistance assessments into trade policy reviews is
highly commendable.  Much of the assessment focuses on Madagascar’s general need in the WTO.We support additional technical assistance by multilateral agencies and bilateral donors to help
Madagascar in this area and would also be interested in learning more about Madagascar’s needs
concerning implementing specific WTO agreements.
III(2)(i) para. 4
The Secretariat Report notes that among the documents required for commercial shipments to
Madagascar is a certificate of origin.  Under what circumstances is the certificate of origin required?
Some countries, such as the United States, do not ha ve any official procedures or agencies to effect
such certification.  Does Madagascar’s certification requirement, like its origin requirement, apply
only to goods being accorded preferential treatment under a trade agreement?
(ii) para. 13
Madagascar levies a number of duties and taxes on imported goods.  These include customs duties,
the import tax, a customs stamp duty and an import statistics tax as well as excise duties and a value
added tax.  The import duty system would be much si mpler if those  taxes were combined with the
customs duty into a consolidated customs duty.  Why does Madagascar maintain the three taxes that
only apply to imports as separate taxes?
(iii)(a) para. 16
The simple average rate of tariffs and taxes combined on imports is 16%;  what is the trade-weighted
average of all taxes and duties on imports?  We note that well over half of all government revenue isWT/TPR/M/80
Page 29
derived from taxes on trade.  Are there any plans for increasing the incidence of the VAT or other
indirect taxes in order to permit further liberalization of the trade sector without an undesired effect on
tour revenues?  Wouldn’t Madagascar benefit in competitiveness terms by further lowering rates oftaxation on trade to reduce costs of production, including in the services sector?
The Secretariat Report states that a comprehensive import duty reform was undertaken and scheduled
to be implemented on 26 February, 2000.  Has this been implemented?
(vii)(a) para. 28
The United States is concerned that Madagascar ha s not notified two important obligations under the
TBT Agreement: (1) the Enquiry Point and (2) under Article 15.2 a statement of Implementation and
Administration of the TBT Agreement.  Could Madagascar please elaborate further on why it has not
notified these to the WTO?
If technical assistance is needed to meet these obligations, the U.S. notes the recent completion of the
Second Triennial Review of the TBT Agreement.  Part  of the work plan for the next year for the TBT
Committee is to develop a demand-driven technical assistance programme.  The U.S. notes that
specific recommendations for foreign assistance, such as for computers, telecommunication facilities,enquiry points etc., are mentioned in the report.  The United States would encourage GOM to submit
specific request for technical assistance to the TBT Committee so that it may meet its TBT
obligations.  In addition, Madagascar should identify what specific needs would help GOM to bring
its domestic laws into compliance with its WTO TBT obligations, which are notified under Article
15.7 and make specific requests for relevant technical assistance.
Para. 29
The Secretariat Report notes that Madagascar has 63 published product standards.  Are these
mandatory or voluntary standards?  Can you pl ease explain how a voluntary standard becomes
incorporated in regulation, and the process of public comment, for both domestic and foreign
interested parties?  Is there a national publication in which proposed technical regulations areannounced?  How far in advance are regulations notified to the WTO to allow interested parties to
provide comments?
(viii) para. 34
The United States understands that most competitive tenders in Madagascar are open to both domestic
and foreign bidders, and that depending on the nature of a contract, international competitive biddingor local competitive bidding is employed.  Please provide information describing what criteria are
used to identify when international or local competitive bidding should be used.  If the decision is
based on an assessment of whether the technical expertise exists locally to satisfy the contract, please
indicate whether this determination is based on clearly identifiable criteria available to foreign
suppliers interested in competing for tenders in Madagascar, or whether such a determination is madeon a "case-by-case basis".
What sort of structure to settle trade disputes and what measures to increase transparency in
government procurement are the Government considering?WT/TPR/M/80
Page 30
(4)(i) para. 58
The Secretariat Report notes that 136 companies were slated to be privatized between 1997 and 2002
and that in the period to June 30, 2000 46 companies were earmarked for privatization or liquidation.What is the timetable for privatizations to 2002?
(iv) para. 72
How is enforcement provided at the border against imports of pirated copyrighted works and
counterfeit trademarked goods?
Para. 74
We understand Madagascar is currently revising legislation with respect to patents, trade marks and
copyrights to meet Madagascar’s TRIPS commitments.  Can you please provide information about the
status of this revision process?
The report notes that since 1994 Madagascar’s Office of Industrial Property (OMAPI) has granted
more than 4,700 patents, industrial designs and trade marks.  What kind of successes or difficulties
has OMAPI had in examining these requests?
IV(1) para. 2
Madagascar has achieved considerable liberalization in agricultural trade.  We note the statement in
the WTO Secretariat’s Report that "tariff protection in agriculture averages 17.7%."  Is this figure
stated in nominal or trade-weighted terms?  Does it include all taxes on agricultural trade?
(2) Agriculture and Related Activities
The United States commends Madagascar for the tremendous steps it has taken to liberalize its
agricultural sector in recent years.  We note, however, that the average tariff rate in Madagascar is
16.2% and the average tariff rate for agricultural, hunting, forestry & fishing is 17.7%.  Does the
Government of Madagascar intend to reduce agricultural tariffs to the country’s average tariff level in
order to facilitate food imports when the country experiences natural disasters, as has happened
several times.
(3) Mining and Energy
The Secretariat Report states that the Government has a policy of increasing investment and
production in the mineral sector.  While we applaud the resulting increase in, among other things,
gemstone mining, we are concerned by reports that unregulated activity in this sector is resulting in
significant environmental damage with little revenue accrual to the Government.  This situation isvery costly to Madagascar and would not appear conducive to the sort of long-term sustainable
development that the authorities have in mind.  Could you comment?
(4) Manufacturing
The Secretariat Report notes, however, the underdevelopment and inefficiency of Madagascar’s
manufacturing sector, suggesting that there are substantial efficiency (and employment) gains to berealized from further trade liberalization.  Would appreciate comment on these points by the Malagasy
delegation.WT/TPR/M/80
Page 31
(5) Services
We commend Madagascar for the steps it has taken to encourage competition in the services sector of
its economy.  We believe that Madagascar can enhance its own competitiveness in the globaleconomy by allowing its consumers ready access to better, cheaper, and more diversified services.
The Secretariat Report points out that although the services sector comprises approximately 52% of
Madagascar s GDP it has only recen tly received serious attention.
Madagascar’s Schedule of Specific Commitments under GATS is limited.  These commitments fall
far short of its current levels of openness in services.  Is Madagascar considering increasing itscommitments?
(ii)(a) Banks and other financial institutions
In the 1990’s Madagascar undertook a major programme to privatize its banking system, which has
been very successful.  Furthermore, foreign part icipation in the banking system is now common.  Is
the Government planning to sell its remaining minority holdings in three banks?
(iii) Tourism
The report notes that tourism is underdeveloped and Madagascar is working to expand it.  What is the
Government doing to facilitate the process for investors in tourism to have access to developable
land?
(iv) Telecommunications
The report notes that Telecom Malagasy (Telma) is the only supplier of basic telecommunications
services and also manages the system.  Telma has already been partially privatized, but 66% of itscapital is still held by the State.  When is th e Government planning to further privatize Telma?
Madagascar has made no specific commitments unde r GATS with respect to telecommunications.  Is
the Government planning to liberalize basic telecom services?  As the Government undertakes
liberalization, are there any plans to make new GATS commitments to provide assurances to investors
and to codify these changes?WT/TPR/M/80
Page 32
ANNEX II
WRITTEN RESPONSES BY THE DELEGATION OF MADAGASCAR
I. ECONOMIC ENVIRONMENT
The main objective of Madagascar's macroeconomic policy, as contained in the poverty
reduction strategy paper (PRSP), was to achieve a high and sustainable level of growth by stimulating
supply in a stable environment of industrial devel opment.  Cooperation and regional integration were
also being strengthened to enable Malagasy operators to benefit from economies of scale.
Madagascar had thus applied a controlled budg etary policy (reduction of the budget deficit), a
prudent financial policy (control of inflation a nd of money supply growth), and institutional and
sectoral reforms (privatization, liberalization, independence of the Central Bank), which had led to an
increase in national savings and a consequent increase in investment.  An environment conducive to
attracting savings had also been created.
The performance of certain branches of the services sector, such as tourism,
telecommunications, and transport, would be maintained through the development of regional and
international trade, and investment in these sectors was encouraged.
At the end of the 1990s, the level of outstanding debt corresponded to 444% of export
earnings and 108% of the GDP.  This situation would inevitably have severely handicapped growth
prospects had it not been for the HIPC initiative, which had made it possible to wipe out roughly 40%
of the Malagasy debt.
The Government planned to use the resources ob tained from the HIPC initiative as follows:
25% for education, 20% for health, including 3% for the HIV-AIDS campaign, 5% for the
strengthening of institutions, 40% for investment (including 20% for highway maintenance, opening
up isolated areas and rural dirt roads, and 3% for drinking water infrastructure), and 10% for other
purposes, including the environment, women's advan cement, etc.  This breakdown might be modified
when the full PRSP was finalized.
A number of measures had been taken in connection with the development of the private
sector:
- establishment of an operational system of arbitrage;
- facilitation of the grant of long-term leases;
- simplification of procedures for obtaining work permits, residence permits and the
resident's card;
- privatization.
One hundred and thirty-six state-run enterprises were to be privatized during the period
1997-2002.  A group of 46 companies, including Air Mad, the National Railway Network (RNCFM),
Télécom Malagasy (TELMA), the Madagascar Sugar Company (SIRAMA), and the MadagascarCotton Production Company ( HASYMA) were to be sold by the end of 2001.  On the other hand, the
procedures for privatizing insurance companies would be initiated in 2002.WT/TPR/M/80
Page 33
The Malagasy economy was being liberalized gradually.  After initially focusing on price
determination ("true" pricing policy), liberalization was subsequently extended to such areas as
foreign exchange and trade, and sectors such as oil, transport, and telecommunications.
In order to improve tax revenue and progressively reduce the dependence on customs
revenue, the administration had adopted a number of measures such as broadening the tax base while
controlling inflation, increasing controls in the granting of special tax and customs regimes,
reorganizing the tax and customs administration in order to increase tax pressure, and introducing a
consolidated tax on so-called informal activities.  The purpose of the latter tax was to serve as anincentive to all economic operators.
The investment code had been replaced by the general tax code.  Only investments in the
context of the free zone currently required prior authorization.  At the Ministry for the Development
of the Private Sector and Privatization, there was a business development facilitation centre (Centre
de Facilitation de Création d'Entreprise – CFCE) , which dealt with the formalities involved in the
establishment and registration of companies.  Its aim was to reduce delays in the processing of files.
Foreign investments were no longer subject to regulatory restriction.  The law no longer
imposed a share purchase ceiling for local or foreign investments.  Foreign and national investments
were subject to the same terms and conditions.
With regard to the Government's strategy against sexually transmitted diseases (STDs),
although the AIDS situation was far from alarming in Madagascar, the Government had taken pains to
prevent the possible rapid spread of this epidemic  by setting up a Coordinating Committee attached to
the Prime Minister's Office, which was responsibl e for drawing up, by April 2001, a strategic plan to
prevent and combat AIDS.
Furthermore, with the recent adoption of the law against paedophilia, and of criminal
sanctions for drug trafficking, drug consumption, procuring, and prostitution, which were a cause of
the spread of STDs, Madagascar had strengthened its legal mechanisms for the preservation of publichealth.
Awareness-raising programmes were due to be launched in March 2001 in the most
vulnerable areas.
Regarding competition, new legislation was in the process of being adopted at Council of
Ministers level – having already been adopted by the Council of Government.  An Order oncompetition dealt with the subject of liberaliza tion.  The State had already withdrawn from the
productive sector and all price controls were lifted in 1989.
In the matter of investment, access to property ownership, and tourism, under the legislation
currently in force any investor could take out a long-term lease of land for building for a renewable
and assignable period of 18 to 99 years.  The lessee was free to use the lease as security for a loan orany other financial transaction with third parties, including banks and financial institutions.
In order to guarantee land security and remove a major obstacle to the development of
reception infrastructures, the Ministry of Tourism was currently implementing a wide-ranging
programme for the establishment of tourist land reserves (Réserves Foncières Touristiques – RFT) ,
under which the Malagasy State was making publicly owned land available to investors in the tourism
sector.WT/TPR/M/80
Page 34
Investors now had a choice between different sites that no longer posed problems of land
ownership, as a result of guarantees provided in advance by the public authorities.
The Isalo tourist land reserve (near the nature reserve parks of Isalo) was currently open to
international competitive bidding on the website "www.madagascar-contacts.com/mintour".
Other tourist land reserves would be added to this offer in the near future, namely:
- tourist land reserves dedicated to eco-tourism in the northern part of the island
(Antsiranana);
- tourist land reserves used for health resorts at Nosy-Be and in the south-west region
of Madagascar.
In the area of investment promotion, ordinary-law enterprises (entreprises du droit commun)
were governed by provisions contained in the General Tax Code (CGI).
With regard to free-zone enterprises, a reform of the export-processing zone (EPZ) regime
was under consideration and the relevant draft legislation would be submitted to the National
Assembly during 2001.
Regarding regional arrangements, Madagascar was a member of three regional groups:  the
ACP/EU Partnership Agreement, the Common Mark et for Eastern and Southern Africa (COMESA),
and the Indian Ocean Commission (IOC).  In the cas e of the latter two groups, Madagascar applied
the commitments arising from its membership of these regional organizations, subject to reciprocity.
In the area of bilateral relations, the Republic of Madagascar had concluded bilateral trade
and cooperation agreements with a view to promoting trade relations on a most-favoured-nation(MFN) basis.
The period from 1961 to 1985 was marked by the adoption of an increasing number of
agreements between Madagascar and the members of the IOC, the Gulf countries, and the countries of
Asia, Africa, and Europe.  Trade agreements we re under negotiation with Mauritius and India.
The representative of Madagascar noted that the difficulties encountered in the
implementation of the existing WTO Agreements we re an argument in favour of a request for
technical assistance, and thanked Norway and Canada  for their readiness to finance such assistance.
He also thanked Malaysia for the training programmes in which Madagascar was invited to
participate, as well as all those who had contributed to technical assistance for Madagascar.
He referred to technical assistance requirements, which were not exhaustive, since official
requests would be made:
- training of supervisory staff in comme rcial and regulatory disciplines and
strengthening of human and institutional capacities in respect of notifications and the
fulfilment of obligations and commitm ents arising from the WTO Agreements
(notification, implementation, drafting of legislation, risk analysis within theframework of the SPS Agreements, drafting of standards);
- consolidation and fitting out of the existing foreign trade training centre;
- rehabilitation of the reference centre;WT/TPR/M/80
Page 35
- establishment of a data coordination system in the context of the economic
information services;
- analysis of export potential and a strategy to promote competitiveness and market
access;
- trade analyses and forecasts to assist in the search for new foreign markets.
The question of the launch of a new round of negotiations would be the subject of
Africa-wide consultation.
Regarding the integrated framework, Madagascar had officially committed itself to the
process since its adoption and wished to see its effective implementation, although no satisfactory
results had been achieved to date despite the considerable efforts of the Director-General.
Madagascar welcomed the latest developments, including in particular the adoption of a pilot
programme by the Sub-Committee on LDCs.
II. TRADE POLICY
All the ministerial departments had been involved in the elaboration of trade policy, together
with the Central Bank of Madagascar and the Technical Secretariat for Adjustment (STA).
The Ministry of Trade and Consumer Affairs played the leading role in implementing this
policy, inasmuch as it bore prime responsibility for import regulation, export promotion, and the
definition and application of standards.  It was also responsible for matters relating to regional
initiatives in the context of the Common Market for Eastern and Southern Africa (COMESA) and the
Indian Ocean Commission.  WTO-related trade issues were also within its remit.
Other ministries dealt with trade matters that fell within their respective fields of competence
(Ministry of the Budget, Ministry of Agriculture, etc. …) and in close collaboration with the agencies
concerned.
The private sector had provided input into trade policy formulation through professional
groups of economic operators such as the Madagascar Enterprises Group (GEM), FIVMPAMA,CONECS, the Chamber of Commerce, Industry and Agriculture (CCIA), and the Industrial Trade
Union of Madagascar (SIM), under the auspices of the Committee on Competitiveness (CRC).
A national committee to monitor implementation of the WTO Agreements would be
established shortly.
Madagascar had applied the Agreement on Customs Valuation since 17 November 2000, that
is to say within the required time-frame.
With regard to preshipment inspection (PSI), Madagascar had concluded a preshipment
inspection contract with BIVAC Veritas, until April 2001.  Possible renewal of the contract was still
under consideration.
In the context of the structural adjustment programme, Madagascar had undertaken a gradual
downward adjustment of its tariff so that ne ither customs duties nor import charges exceeded a
maximum of 30%.WT/TPR/M/80
Page 36
Similarly, in the context of the Cross-Border Initiative, renamed the Regional Integration
Facilitation Forum, tariff restructuring had been unde rtaken in cooperation with the financial partners,
resulting in rates of 5%, 15% and 25%.
However, on a transitional basis, and in order to avoid an excessive loss of revenue, a rate of
30% had been maintained, which would be lowered gradually, to a maximum rate of 25% by the
year 2003.
To date, more than 50% of government revenue had come from duties and charges collected
on foreign trade transactions.  The aim was to reduce this dependence gradually, for example bybroadening the VAT and indirect tax base.
In addition to customs duties as such, the customs administration collected fiscal charges on
imports.  Import charges were introduced in 1960;  the most recent were the customs stamp duty and
the statistical tax.  The customs stamp duty was established to provide revenue to be used to
strengthen the customs administration's capabilities, particularly as regards training and action to
combat fraud, while the statistical tax was used to support the computerization of administrative
services in general and the improvement of statistics in particular.
The other taxes about which a question had been raised were the fiscal import charges other
than customs duties proper.
As has already been mentioned, more than 50% of state revenue came from import duties and
charges.
It was true that import charges had an impact on production costs, and hence on
competitiveness, but to reduce them at the present time could result in a major loss of revenue for the
State.
The relationship between import charges and CIF value varied from year to year, depending
on the rates approved by Parliament.
The structure of the future COMESA Common External Tariff (CET) would depend on the
results of the negotiations conducted among the members of that group of countries.  Madagascar
would doubtless accept the CET, when the CO MESA customs union entered into force in 2004.
The Malagasy authorities had taken a number of steps to strengthen the capacities of the
customs administration, including the following:
- establishment of the customs stamp duty to finance the training of customs agents and
the work of combating customs fraud;
- establishment of the National Customs School in 1996, which had produced a first
class of 30 graduate inspectors, who were already working in the field.  A further 30
inspectors were currently undergoing training at the school;
- progressive computerization of central services and of the major external bureaux,
using the Asycuda system, which was being updated in version 3++ (three plus plus)
with co-financing by bilateral and multilateral donors;
- the Customs Directorate was renamed the General Directorate of Customs in 1999;WT/TPR/M/80
Page 37
- assignment of senior staff in the Customs Administration to diplomatic missions like
those in Geneva and Brussels;
- training of certain senior staff in foreign customs schools under bilateral cooperation
arrangements.
With regard to the continuation of reforms in the administration, it was planned to update
legislation and procedures in particular, by adopting the revised version of the Kyoto Convention and
introducing the relevant provisions of duly ratified international and regional agreements.
As far as the plurilateral agreements were concerned, Madagascar was not a signatory to the
WTO Plurilateral Agreement on Government Procurement, or to the three others on dairy products,
bovine meat, and civil aircraft, for the simple reason that it was involved in neither the negotiation nor
the drafting of those Agreements.
Pending detailed consideration of the economic and commercial repercussions of its possible
accession to the Agreement on Government Procurement, Madagascar reserved the right to apply for
observer status in relation to that Agreement, in  order to familiarize itself with its operating
mechanism.
Regarding the protection of intellectual property, a draft law to modify Order 89-019 on the
introduction of an industrial property protection regime in Madagascar was currently at the drafting
stage.
The draft law took account of the provisions of the TRIPS Agreement and dealt with the
following points:
- duration of protection;
- procedures for granting titles of protection;
- border protection;
- protection of geographical indications.
With regard to the protection of intellectual property, apart from the adaptation and adoption
of TRIPS-consistent legislation currently under discussion at government level, concrete measures
had been taken within the framework of the 2000 Finance Law to combat trade in counterfeit
trade mark goods and pirated merchandise as cases of customs fraud.  Thus, a new Article 27 bis was
incorporated in the Customs Code to prohibit the entry and removal of such goods and to provide for
appropriate sanctions ranging as far as confiscation and destruction.
III. SECTORAL POLICIES
In the matter of food safety and SPS standards for products of animal origin, Law 91-008 of
25 July 1991 on animal health and its implementing texts defined technical standards and practical
implementing procedures in respect of sanitary requirements for livestock.
The import and export of animals, products and foodstuffs of animal origin, and fodder,
feedstuffs and grains intended for animal feed were regulated.WT/TPR/M/80
Page 38
Their authorization was subject to approval by the competent veterinary authority, in
accordance with the International Animal Health Code of the OIE (International Office of Epizootics)
and having regard to the technical standards laid down by the importing country.  On the practicallevel, the competent authority undertook risk analyses, and for that purpose might enlist the services
of internationally recognized laboratories.
The other measures that were applied related to the traceability of products.
For bovine animals, they consisted in the iden tification of the animal and products thereof by
tagging its ear as a means of monitoring its progress and, above all, its state of health.
In the case of fish products, the identification process began either on fishing vessels or at fish
farms;  the products were then monitored throughout the stages of processing in establishments
approved by the competent authority, which had a pool of 18 specially trained official veterinarians at
its disposal for that purpose.
Concerning products of vegetable origin, Order No. 86-013 of 17 September 1986, together
with its implementing Decree N o. 86-310 of 23 September 1986, governed phytosanitary legislation
in Madagascar.  Decree No. 96-473 of 23 April 1992, together with the relevant implementing orders,and Decree No. 95-092 of 31 January 1995 regulated agri-pharmaceutical products and provides for
sanctions for offences in connection with the marketing, distribution, and use of agri-pharmaceutical
products.
These texts were supplemented by Decree No. 99-798 of 6 October 1999 on the type approval
of biological control agents and biopesticides, which regulated their marketing and use in accordancewith the Pesticides Code.
Firms operating in the textiles sector needed to prepare for a competitive environment once
the quota system came to an end.
In the context of the platform for cooperation (CRC) between the State and the private sector,
the State's role was confined to establishing a support structure designed to strengthencompetitiveness (FASP).
Concerning the specific commitment on trade in services, in the context of the Uruguay
Round Madagascar undertook a specific commitment in a number of fields, such as technical trial and
maintenance services in the industrial sector, repair of equipment in the tourism and hotel industry,
etc.  Though relatively modest, the level of commitment was well within Madagascar's capabilities.
It was important to emphasize that the offer made was devised at a time when the country was
still in the midst of a study on its existing potentialities in this field;  lack of financing had made it
impossible to complete this work, which had been carried out in collaboration with the technical
assistance department of UNCTAD.
At the appropriate time and when the state of the economy was more favourable, Madagascar
might consider reviewing the national offer by improving or extending the commitments to a number
of other fields such as telecommunications, air transport, etc., which were undergoing liberalization.
The Malagasy Government's policy with regard to telecommunications was one of
liberalization based on the introduction of free competition for all services.WT/TPR/M/80
Page 39
With this aim in view, satisfactory arrangements were necessary for the training of human
resources and the establishment of the infrastructure needed for growth.
Law No. 96-034 on the institutional reform of the telecommunication sector reflected the
liberalization process and had led to a major restructuring of the telecommunication environment.
Under the Law, the telecommunication regulations were modified to promote the development of
private initiatives.
The State currently owned 66% of the shares in Télécom Malagasy (TELMA), but planned to
sell some of them to private investors in the cont ext of its policy of withdrawal from nationally owned
companies.  Furthermore, a regulatory author ity for the telecommunication sector, the Malagasy
Office for Telecommunications Research and Regulation (Office Malagasy d'Etudes et de Régulation
des Télécommunications – OMERT) , was set up under Decree No. 97-1077 of 28 August 1997.
The regulatory authority for the sector (O MERT) approved telecommunications service
tariffs.  Tariffs were freely set by the operators.  However, tariffs for the operation of networks not
subject to competition, and interconnection tariffs might be controlled by the regulatory authority.
With regard to tourism, the State was endeavouring to improve incentives for the benefit of
both investors and tourists, inter alia,  through:  revision of the implementing regulations under the
Tourism Code;  the possibility of having visas issued directly at the airport; and the liberalization of
air traffic, resulting in a substantial reduction in tariffs, which had become competitive at the regional
level.
With regard to the mining sector, the Government Report mentioned that Madagascar's
mining policy was contained in the new Mining Code enacted on 19 August 1999, and a law on
large-scale mining investment, ready for adoption in the near future, would establish a more attractive
tax regime for investors.  This draft legislation was the fruit of consultations among all the parties
concerned, including the Malagasy Government, private operators, and donors.
In order to exert much greater control over the social and economic situation produced by the
recent discovery of fairly large-scale deposits of precious stones, including rubies and sapphires in
particular, the Government had recently adopted fresh amendments to a decree establishing
administrative zones with special economic characteristics and subject to a special tax regime;  these
were known as special economic activity zones (Zones d'activités Economiques Spéciales  – ZAES),
and had been established to meet three basic objectives:
- enhanced security for the State's budgetary income;
- enhanced security of economic activities initiated by operators in the formal sector,
within these zones;
- the formalization of economic activities directly or indirectly related to prospecting,
exploration, and mining of precious minerals.
A special partnership agreement between the Malagasy State and the mining operators
governed the mining and marketing of precious minerals in the ZAES by means of rules aimed,
inter alia,  at achieving the three main objectives referred to above, as well as the effective
implementation of measures agreed for the protection of the environment.
With regard to so-called prohibited substances, the new Mining Code contained the concept
of fossil deposits.  Given their scientific value, particularly for the dating of sedimentary strata or theWT/TPR/M/80
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establishment of the specific geological characteristics of a region, fossil deposits subject to special
rules would be identified.
Thus, the prohibition currently applied only to a list of fossil substances to be drawn up
shortly.  The reference to certain mineral substances as strategic products, which was contained in the
earlier mining law, had been deleted in the new Mining Code.
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