RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/197 
27 February 2008  
 
(08-0771) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
MADAGASCAR 
 
  
 
This report, prepared for the second Tr ade Policy Review of Madagascar, has 
been drawn up by the WTO Secretaria t on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarif ication from Madagascar on its trade 
policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr Jacques Degbelo (Tel.:  022 739 5583). 
 
Document WT/TPR/G/197 contains the policy statement submitted by 
Madagascar. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Madagascar. Madagascar WT/TPR/S/197 
 Page iii 
 
 
CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT REGIMES  viii 
 (3) T RADE POLICY INSTRUMENTS  viii 
 (4) S ECTORAL POLICIES  x 
 (5) T RADE POLICY AND TRADING PARTNERS  xi 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AIN FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (3) T RADE AND INVESTMENT  5 
 (i) Trade in goods and services 5  (ii) Investment 6 
 (4) O
UTLOOK  7 
II. TRADE AND INVESTMENT REGIMES 10 
 (1) O VERVIEW  10 
 (2) P OLICY OBJECTIVES  12 
 (3) T RADE AGREEMENTS AND ARRANGEMENTS  13 
 (i) WTO 13 
 (ii) Regional agreements 14 
 (4) I NVESTMENT  20 
 A NNEX II.1:   TRADE -RELATED TECHNICAL ASSISTANCE  23 
 (1) I MPLEMENTATION OF AGREEMENTS , TRAINING AND POLICY FORMULATION  23 
 (2) S UPPLY -SIDE CONSTRAINTS  24 
 (3) O NGOING INTEGRATION OF TRAINING AGREEMENTS AND POLICY FORMULATION  24 
III. TRADE POLICIES AND PRACTICES BY MEASURE 26 
 (1) I NTRODUCTION  26 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  27 
 (i) Registration 27  (ii) Customs procedures 27 
 (iii) Rules of origin 29 
 (iv) Customs levies 29  (v) Prohibitions, quantitative restrictions and licences 36 
 (vi) Standardization, accreditation and certification 37 
 (vii) Sanitary and phytosanitary (SPS) measures 38  (viii) Rules on packaging, marking and labelling 39 
 (ix) Contingency measures 40 
 (x) Other measures 40 WT/TPR/S/197 Trade Policy Review 
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  Page 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  40 
 (i) Customs procedures 40 
 (ii) Export duties and taxes 40  (iii) Prohibitions, quantitative restrictions, controls and export licences 41 
 (iv) Export subsidies, promotion and assistance 41 
 (v) Industrial Free Zone 41 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  42 
 (i) Incentives 42 
 (ii) Competition and price controls 42  (iii) State trading, State-owned enterprises and privatization 43 
 (iv) Government procurement 48 
 (v) Protection of intellectual property rights 49 
IV. TRADE POLICIES AND PRACTICES BY SECTOR 52  
 (1) I
NTRODUCTION  52 
 (2) A GRICULTURE AND RELATED ACTIVITIES  53 
 (i)  Overview 53  
 (ii)  Agricultural policy 55  
 (iii)  Policy by subsector 57  
 (iv)  Fisheries and aquaculture 60  
 (v)  Forestry 61  
 (3) M INING , ENERGY AND WATER  63 
 (i)  Mining products 63  
 (ii)  Petroleum products and natural gas 65  
 (iii)  Electricity and water 66  
 (4) M ANUFACTURING  68 
 (5) S ERVICES  70 
 (i)  Transport 70  
 (ii)  Tourism 73  
 (iii)  Telecommunications and postal services 74  
 (iv)  Financial services 75 
REFERENCES   77 
APPENDIX TABLES  81 
 Madagascar WT/TPR/S/197 
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CHARTS 
 
  Page 
I. ECONOMIC ENVIRONMENT 
 
I.1 Structure of trade in goods, 2000-2006 8 
I.2 Direction of trade in goods, 2000-2006 9  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Applied MFN tariff rates, by HS section, 2008 31 
III.2 Breakdown of MFN duties applied, 2008 32 III.3 Escalation of MFN duties applied, 2008 33 
 
TABLES 
I. ECONOMIC ENVIRONMENT 
 
I.1 Madagascar in figures, 2000-2006 1 I.2 Main economic indicators, 2000-2006 3 
I.3 Balance of payments, 2000-2006 5 
II. TRADE AND INVESTMENT REGIMES 
 
II.1 Madagascar's principal trade-rela ted laws and regulations, December 2007 11 
II.2 Status of WTO notifications, 1995 to August 2007 14 II.3 Fiscal regulations under the industrial free zone regime, December 2007 22 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 III.1 Itemized customs revenue from imports, 2000-2006 30 
III.2 MFN applied tariff structure, 2007-2008 31 
III.3 Summary of MFN (DD) tariff, 2008 33 
III.4 Differences between excise duties/ charges applied to local and imported 
products, 2007  35 
III.5 State holdings, October 2006 43 
III.6 Thresholds for the award of public contracts, 1 January 2008 49 
III.7 Industrial property applications and titles issued, 1994-2006 51 
IV. TRADE POLICIES AND PRACTICES BY SECTOR 
 
IV.1 Production of food crops, 2001-2005 54 IV.2 Trend in the food balance sheet for rice, 2000-2005 54 
IV.3 Trend in the export of fisheries products, 2003-2006 55 
IV.4 Exports of forest products, 2006 62 IV.5 Breakdown of activities in the manufacturi ng sector outside the free zone, 1999-2006 68 
IV.6 Telecommunications service indicators, 2001-2006 74 WT/TPR/S/197 Trade Policy Review 
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APPENDIX TABLES 
 
  Page 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Structure of exports, 2000-2006 83 
AI.2 Structure of exports (including re-exports), 2000-2006 85 AI.3 Structure of imports, 2000-2006 87 
AI.4 Destination of exports, 2000-2006 89 
AI.5 Destination of exports (including re-exports), 2000-2006 90 AI.6 Origin of imports, 2000-2006 91 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 AIII.1 Import duties by HS chapter, 2008 92 
IV. TRADE POLICIES AND PRACTICES BY SECTOR 
 AIV.1 Applied MFN tariffs by ISIC Rev.2 category, 2008 95 
 Madagascar WT/TPR/S/197 
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SUMMARY OBSERVATIONS 
 
(1) ECONOMIC ENVIRONMENT  
1. The socio-political crisis experienced 
by Madagascar from 2001 onwards ended in 
July 2002 and since then its economy has recorded sustained real growth, at an annual average of 6.2 per cent between 2003 and 2006, much higher than the 2.6 per cent 
demographic growth.  This economic growth 
was boosted primarily by the expansion of industrial activities in the free zone, construction, financial services, mobile telecommunications and transport.  These sectoral performances can be attributed in 
particular to the liberalization reforms, 
particularly in trade, implemented by Madagascar through its macroeconomic stabilization and structural adjustment programme, launched in 2002, and backed up 
by a Poverty Reduction and Growth Facility 
(PRGF) from the IMF.  Focusing on the "Madagascar Action Plan" (MAP), the economic and social development strategy for the period 2007-2011 followed on from the Poverty Reduction Strategy Paper (PRSP) 
adopted in 2003.  These various efforts have 
enabled Madagascar to benefit from a sizeable reduction in its external debt as a result of several initiatives, bringing its official external debt servicing down to 3.9 per cent of earnings 
from exports of non-factor goods and services 
in 2006. 
2. Despite the reform efforts, recent 
economic performance and international support, Madagascar remains a poor country (a 
less developed country with per capita GDP 
estimated to be US$ 313 in 2006).  Its economy is mainly based on services (around 57 per cent of nominal GDP in 2006), followed by agriculture, including fisheries, livestock and forestry (27 per cent); and 
manufacturing (16 per cent).  Around three 
quarters of the population earns most of its income from agriculture, mainly subsistence farming, which means that this sector is a priority for achieving the MAP objectives.  
Performance in the agricultural sector is, 
however, generally poor.  Manufacturing's share of the GDP is growing because of the 
enterprises established under the industrial free zone (IFZ) regime, which are given tax benefits.  The majority of companies share the 
same concerns regarding access to finance, 
water and electricity supplies, and transport and telecommunications services, not forgetting macroeconomic instability and shortcomings in governance. 
3. Government finance is facing 
considerable structural problems, particularly because of the common practice of giving tax and customs exemptions and the narrow tax base as a result of the size of the informal sector (estimated to be around 30 per cent of 
total GDP).  Improvements are expected as 
regards governance, including transparency in fiscal management.  The primary budget deficit of some 4.4 per cent of GDP in 2006 is financed by development aid, whose net total 
(grants less debt servicing) was estimated to be 
10.4 per cent of GDP in 2006.  The European Union (EU) and its member countries are large donors to Madagascar. 
4. In addition, the restrictive monetary 
policy followed by the Central Bank of 
Madagascar (BCM) since 2005 has allowed 
the inflationary trends that emerged in 2004 to be brought under control.  In 2005, the ariary replaced the Malagasy franc.  Its real exchange rate has remained fairly stable since 2005, 
which has probably helped Madagascar's 
goods and services to maintain a degree of competitiveness on foreign markets. 
5. The ratio of trade in goods and 
services to Madagascar's nominal GDP was 
some 71 per cent in 2006, approximately the 
same level as at the time of the first review of its trade policy (TPR) in 2001.  Because of the socio-political crisis, exports only returned to their 2001 level in 2006.  Their composition has remained more or less the same: around 
one half of exports is composed of primary 
products (shrimps, vanilla, cloves, chromite and graphite), which mostly go to the European Union.  Half of Madagascar's exports consists of clothing, which goes to the 
United States where it is given preferential WT/TPR/S/197 Trade Policy Review 
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access under the AGOA.  There has been a 
marked increase in imports of goods (at an average annual rate of 16 per cent) since 2001, particularly as a result of soaring oil prices in 
United States dollars.  Madagascar is a net 
importer of services, but net earnings from tourism have risen sharply (at an average annual rate of around 24 per cent since 2001).  Overall, the trade balance has once again 
shown a deficit since 2002. 
(2) T
RADE AND INVESTMENT REGIMES  
6. The Ministry of Trade is responsible 
for defining and implementing Madagascar's trade policy.  The private sector is associated on an ad hoc  basis in following up trade 
policy-related issues.  The Ministry of 
Industry, in cooperation with the Economic Development Board of Madagascar (EDBM), is responsible for investment policy, including the free-zone regime. 
7. Madagascar is a founding Member of 
the WTO and grants at least most-favoured-nation (MFN) treatment to all its trading partners.  It has not signed any plurilateral agreement concluded under the auspices of the WTO.  Since 1995, Madagascar has 
participated as a third party in four dispute 
settlement procedures under the WTO mechanism, the three most recent being related to the European Communities' sugar regime.  Madagascar's participation in the 
multilateral trading system remains limited, 
however;  it has made few notifications to the WTO and does not have any interministerial committee to follow up multilateral trade issues.  The areas in which technical assistance 
has been requested include formulating trade 
policy, taking part in the WTO's regular activities and in trade negotiations, government procurement legislation and practices, dismantling supply-side constraints, integration of trade policy into development 
strategies, notifications and implementation of 
WTO Agreements, including those on customs valuation, technical regulations, intellectual property protection, and remedial measures.  Madagascar participates in the Integrated 
Framework. 8. Madagascar is a member of the 
Common Market for Eastern and Southern Africa (COMESA), whose free-trade zone has been in place since 2000 but whose project for 
a customs union has been deferred until 
December 2008.  In 2005, Madagascar became a member of the Southern African Development Community (SADC), whose intention to establish a free-trade zone in 2008 
was examined by WTO Members in 2007.  
Whilst awaiting the conclusion of an Economic Partnership Agreement (EPA) by 
the end of 2008, Madagascar signed an interim agreement with the EU  in December 2007, 
covering free trade and other trade-related 
issues (including renewal of the sugar 
Protocol). 
9. Since Madagascar's first TPR, its 
investment regime has been reorganized.  Since 2003, the purchase of private land by 
foreign investors may be authorized by the 
Council of the Government subject to input in foreign currency.  A special regime encourages large-scale investment in mining.  New frameworks for the promotion and 
protection of investment and for the industrial 
free zone are planned for 2008.  Several 
bilateral agreements are being negotiated in order to promote Madagascar as a destination.  Since 2004, promoters have been able to complete the formalities for setting up 
companies in four days, at no charge, at the 
"Single Window for Investment and the Development of Enterprises" (GUIDE).  The EDBM, which has been operating since 2005, conducts a technical examination of the 
requests for approval under the free-trade 
regime, whose benefits are granted by decree. 
(3) T
RADE POLICY INSTRUMENTS  
10. All Madagascar's tariffs are ad 
valorem  (zero, 5, 10 and 20 per cent), with the 
exception of those on petroleum products;  in 
2008, the simple arithmetic average rate was 
13 per cent, three points lower than in 2000.  Agricultural products (WTO definition) are subject to higher taxation (a simple average of 14.5 per cent) than non-agricultural products 
(12.7 per cent).  During the Uruguay Round, Madagascar WT/TPR/S/197 
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Madagascar bound all its agricultural tariff 
lines and several non-agricultural lines, representing a total of 29 per cent of tariff lines;  in some cases, the rate applied exceeds 
the level bound on behalf of Madagascar prior 
to independence.  Madagascar gives tariff preferences to products originating in the COMESA and the SADC. 
11. VAT (20 per cent in 2008) and, where 
applicable, excise duty, is also levied, but the 
latter does not respect the principle of national treatment, a matter of consistency that was already a concern at the time of Madagascar's first TPR.  Other import taxes imposed at the customs level were abolished in 2005.  The 
waiver given to Madagascar by the WTO in 
order to maintain minimum values for customs valuation of used goods expired on 17 November 2003.  Preshipment inspection has not been mandatory since April 2007.  
Nevertheless the use of GasyNet's customs 
data treatment system is compulsory, at a cost of 0.5 per cent of the c.i.f. value of the goods.  A green channel is available to importers whom the system deems reliable.  Computerization of trade-related customs 
operations has made considerable progress 
since the first TPR. 
12. Overall, the tariff shows mixed 
escalation, which is unlikely to encourage the establishment of certain industries (where 
escalation is negative) or boost the 
competitiveness of certain domestically-manufactured products (which are given strong effective protection because of the positive escalation) on international markets.  
In addition, companies in the free-trade zone 
are given exemption from duties and taxes on all types of imports together with refund of VAT on inputs of Malagasy origin once it has been proved that the finished products have been exported.  The temporary admission 
regime is often utilized for the equipment 
needed for mining or petroleum prospecting. 
13. Madagascar has not changed its 
import licensing regime since the first TPR and it applies to leaf tobacco and vanillin.  In 
addition, other products  require various import permits for sanitary, phytosanitary or safety 
reasons.  For example, a veterinary or phytosanitary certificate is required for the import or export of any animal or plant 
product.  Madagascar has not notified the 
WTO of any sanitary or phytosanitary measure taken to combat avian influenza or foot-and-mouth disease.  There has been noticeable progress in standardization and the 
Madagascar Standards Bureau (BNM) started 
to operate in 2002.  Based on the results of analyses carried out by independent foreign laboratories, it certifies imported goods that are subject to Madagascar's mandatory standards.  Because of international market 
requirements, mandatory quality standards 
apply to exports of coffee and vanilla and optional standards to litchis and honey. 
14. In 2004, Madagascar opened up 
activities downstream of the petroleum 
subsector by abolishing ceiling prices for 
petroleum products, although these are still monitored.  The price of some basic commodities is monitored and administrative controls apply to the price of generic medicines.  The measures adopted in 2005 on 
good competition practice by companies have 
not yet come into effect and the regulatory authority is not operating.  Three companies have a de jure monopoly:  HASYMA, for the 
production of cotton lint;  KRAOMA, for the 
extraction and marketing of chromium;  and 
the Malagasy Tobacco Board (OFMATA) for the production and import of tobacco.  In addition, the State-owned company JIRAMA has a de facto monopoly of the transport and 
distribution of electricity and of the 
production, transport and distribution of water.  TELMA, a private-law company, has a monopoly of the supply of basic fixed telecommunications services until June 2008.  Despite some impressive achievements in the 
programme for State withdrawal drawn up in 
1997, some major privati zations still have to 
be completed (for example, JIRAMA, Air Madagascar, and the southern railway network).  Furthermore, the State retains a 
minority holding in several companies with a 
seat on the board of directors in order to influence decision-making. WT/TPR/S/197 Trade Policy Review 
Page x 
 
 
15. Royalties apply to commonly exported 
goods such as forestry, fisheries and mining products.  There is also a ban on exports of logs of any species and their semi-finished 
products in order to boost processing.  A new 
Government Procurement Code was adopted in 2004 and has gradually come into effect since 2005.  It provides for invitations to tender, although according to the authorities 
22 per cent of the contracts in 2007 were 
awarded as a result of a single tender.  A national preference margin of 10 per cent is provided in the new legislation.  Madagascar is neither a member nor an observer of the Plurilateral Agreement on Government 
Procurement but would like to receive 
technical assistance in order to gain a better understanding of the Agreement. 
16. Madagascar's industrial property 
regime dates back to 1992 and has not been 
fully harmonized with the provisions of the 
WTO TRIPS Agreement.  Software, plant varieties and breeds of animals or essentially biological processes for obtaining plants or animals, as well as pharmaceutical and veterinary products, co smetics and foodstuffs, 
are not patentable.  Processes for 
manufacturing pharmaceuticals may, however, be patented.  Software is protected for 25 years under the copyright regime.  Piracy mainly affects CDs and DVDs. 
(4) S
ECTORAL POLICIES  
17. Madagascar is an agricultural 
producing country, but its potential is little exploited.  Productivity in the agricultural sector is low because of the small size of farms 
and the rudimentary cult ivation techniques.  
The relatively high demographic growth leads to growing demand for food, whose price has a marked impact on purchasing power.  In addition to its domestic production, Madagascar mostly imports rice, sugar and 
powdered milk.  Following a supply crisis in 
2005, the customs tariff on rice was lowered to zero, but the customs imposes VAT of 20 per cent.  Average tariff protection in the agricultural sector (ISIC definition) is 13.9 per 
cent. 18. One of the MAP's objectives is to 
achieve a "sustainable green revolution" by expanding production and then improving the way in which it is managed, and also by 
removing constraints (particularly road 
transport) on its marketing.  A policy to ensure more secure land tenure is making rapid headway in order to make it easier to finance agricultural activities.  The State no longer 
intervenes in fixing the purchasing price from 
farmers, but subsidizes the supply of seed and inputs and small-scale equipment for growing rice;  since 2002, these products have been subject to a zero tariff.  Consultation forums for each branch (rice, litchis and vanilla) 
facilitate public-private  dialogue on support 
measures in each branch.  A monitoring centre keeps an eye on the price of rice on local markets and disseminates this information in order to streamline the market's functioning.  
Several projects financed through external 
funds support rural development. 
19. Together with mining and tourism, 
fisheries and aquaculture are one of the three major activities on which the authorities are relying as a basis for Madagascar's medium-
term economic development.  Shrimps are one 
of Madagascar's principal exports.  Its tuna resources are exploited under bilateral agreements with the EU and Japan, subject to a financial counterpart.  Fishermen must have 
a fishing licence and pay royalties.  
Nevertheless, the authorities do not appear to have the resources needed to achieve sustainable exploitation of fisheries resources.  They sometimes decide to close the fishing 
season and since 2004 have made it 
compulsory to install turtle exclusion devices on fishing gear.  The fisheries subsector (ISIC definition) is subject to relatively high tariff protection of 18.8 per cent, well above the overall average of 13 per cent, as well as 
20 per cent VAT, which does not encourage 
development of this subsector. 
20. Environmental protection is also an 
element taken into account by the authorities when considering large-scale mining projects 
before authorizing them.  Since 2005, an 
incentive framework has been available for Madagascar WT/TPR/S/197 
 Page xi 
 
 
such investment and it is expected that there 
will be a sizeable increase in the production of mineralized sands, cobalt and nickel in the near future.  These projects call for 
modernization of the railway and the building 
of new mineral ore ports.  Madagascar still produces chromium ore (under a State monopoly), whose price is rising as a result of international demand.  It also exports 
gemstones, but mainly through informal 
channels.  Madagascar intends to observe the requirements of the Extractive Industries Transparency Initiative.  Investment in prospecting by oil companies has risen sharply and it is expected that production of crude oil 
will begin in March 2008. 
21. In addition to the companies set up 
under the free-zone regime, which must export 95 per cent of their output, the manufacturing sector is composed of companies producing 
for the domestic market, mostly foodstuffs, 
beverages and tobacco.  They are given relatively high tariff protection of 16.7 per cent; excise duty applies at a higher rate to imported alcoholic beve rages and cigarettes 
than to those domestically produced.  
Obstacles to the development of 
manufacturing include problems in Madagascar's electricity supply.  Large companies generate their own electricity, but most of the others experience load shedding 
because domestic production is limited.  
Although in principle production, transport and distribution are open to competition, transport and distribution remain the sole prerogative of JIRAMA, whose privatization 
is a priority in order to attract the investment 
needed to modernize the infrastructure. 
22. The number of leisure tourists has 
shown a marked increase since 2003 (over 20 per cent annually between 2003 and 2005), underpinned by a policy to open up 
Madagascar's skies.  In addition, the 
authorities support the development of eco-tourism by creating tourism land reserves, access to which is open to foreigners, even 
though the supply of the necessary water, domestic transport and telecommunications services is inadequate.  Financial services 
(banks, micro-finance institutions and 
insurance) are open to competition from foreign suppliers.  A new regulatory framework governs micro-finance.  Madagascar has not, however, bound measures 
on the supply of certain tourism services under 
the GATS. 
(5) T
RADE POLICY AND TRADING 
PARTNERS  
23. Madagascar has made progress in 
liberalizing its trading regime.  The positive 
results achieved by these reforms, as well as 
the performance of companies in the free-trade zone operating in a fairly liberal environment, underscore the need for Madagascar to continue with this liberalization, which should 
be backed up by continued structural reform 
and macroeconomic stabilization so as to enhance the business climate and lift supply constraints.  Continued efforts towards good governance should help in this respect. It is important to ensure that the introduction of the 
COMESA's CET does not reverse the positive 
trend over the period sinc e Madagascar's first 
TPR. 
24. In general, stronger multilateral 
commitments by Madagascar through 
extension of its tariff bindings to more non-
agricultural products, lower bound rates and a stronger GATS commitment would reinforce these reforms and make its trading regime more transparent, more credible and more 
predictable.  Such a climate would help 
Madagascar to attract the capital needed to exploit its vast potential and derive greater benefit from its participation in the multilateral trading system.  The international community could give Madagascar mo re help in its reform 
efforts by responding favourably to its 
requests for technical assistance.