SCENESETTER FOR A/S FRAZER'S VISIT TO MADAGASCAR

UNCLAS ANTANANARIVO 001251

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/FO -- ASSISTANT SECRETARY FRAZER
DEPT FOR AF/E -- MBEYZEROV

E.O. 12958: N/A
TAGS: PREL PGOV ECON OVIP MA CN
SUBJECT: SCENESETTER FOR A/S FRAZER'S VISIT TO MADAGASCAR


1. (SBU) SUMMARY. Welcome to Antananarivo! Your visit to
Madagascar and the Union of the Comoros comes at an important time
as both countries - in quite different circumstances - face
challenges that are likely to define the future character of their
governance. Your arrival, as the highest ranking State Department
official to visit in decades, provides you some ability to help
steer this process in each country. In Madagascar, President Marc
Ravalomanana has staked the future of his presidency on a bold
vision for rapid development described in the Madagascar Action
Plan, or the MAP. Immediately following a month of unprecedented
public consultation on the strategy for attaining the eight
different MAP goals, the president suffered a crushing defeat in the
Antananarivo mayoral elections, with the president's candidate
losing 2-1. Ravalomanana's vision for the future and his determined
efforts to shake his countrymen into more assertive action to
improve their well-being are laudable; however, he is always
headstrong and he can be capricious, so the days ahead will
determine whether he opens political space for the victorious
mayoral challenger or seeks to grasp the reins of power even
tighter. Initial indications are positive, and you can support him
in the notion that losing elections is as much a part of democracy
as winning them. Septel provides a scenesetter for the Comoros.
END SUMMARY AND INTRODUCTION.

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MADAGASCAR - Political
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2. (U) Relative political stability, significant natural resources,
a strategic location in the Indian Ocean, and a distinctly
pro-American government make Madagascar a country of growing
interest to the United States. Madagascar is important because,
almost alone among African countries, it is making simultaneous
progress in consolidating democracy, developing as a free market
economy, combating corruption and trafficking in persons, fighting
HIV-AIDS before it takes hold, and protecting its unique
environment. In recognition of these accomplishments, Madagascar
was selected as the first Millennium Challenge Account (MCA)
country. However, these advances are fragile and susceptible to
setbacks in a country of heartbreaking poverty and shallow-rooted
democratic traditions.


3. (U) You will recall well that Madagascar's 2001 presidential
election, rife with irregularities, sparked a six-month political
and economic crisis and temporarily split the country in two,
bringing the country to the brink of civil war. Former President
Didier Ratsiraka attempted to blockade the capital by attacking
inbound infrastructure, particularly the bridges; however, the
Ravalomanana forces steadily gained control over the entire country,
ultimately forcing Ratsiraka into exile in July 2002. The United
States government played a pivotal role in assisting the country to
come to a peaceful resolution - still vividly remembered here -- but
Madagascar emerged from this crisis and nearly 25 years of socialist
mismanagement with a crumbling economy and a fractured political
system. The 2006 presidential elections, by contrast, were
generally free and fair and President Ravalomanana won with a
landslide 57 per cent despite facing 13 challengers.


4. (U) In power, Ravalomanana has moved with decided, and at times
controversial, swiftness to move Madagascar onto a path of rapid
growth and development, most recently through an ambitious five-year
development program called the Madagascar Action Plan (MAP); you
will hear repeated references to the MAP as the country's
over-arching development blueprint, and your interlocutors will seek
your support for the "MAP Road Show" they will take to Washington in
February. Throughout November 2007, Ravalomanana and his government
hosted the Presidential Dialogue talks, essentially a public comment
period on the eight MAP topics ranging from good governance to
economic growth to health and education. A cabinet reshuffle in
late October put a number of more competent ministers in place, in
line with the overall theme set by the President for his second
term: "results, results, results." The big surprise was the
appointment of the first ever woman and civilian Minister of
Defense. Explaining that Madagascar needs to empower women to
proceed on the path of development, the President pointed to
Condoleezza Rice's former role as national security advisor in the
U.S. as his model.


5. (U) The promotion of democracy remains a top U.S. foreign policy
objective in Madagascar. To advance this goal, we have worked with
the Malagasy government and civil society to ensure free, fair, and
transparent elections as a top priority. In the past year alone,
the Malagasy have gone to the polls four times: for presidential
elections in December 2006, a constitutional referendum in April,
National Assembly elections in September, and municipal elections
last week. Although dominated by the President's TIM political
party, all were considered by international and domestic election
observers to be generally free and fair despite minor
irregularities. However, repeated calls for electoral reforms, such
as a truly independent national electoral commission and a single
ballot, have gone unheeded; we have indications that the GOM will
take up electoral reform in April, 2008, after Senatorial and
regional elections are held - something you should encourage.
Whether due to voter fatigue or the sense that the ruling TIM
party's victory was inevitable, the last four elections were marked
by progressively lower voter turnout. The one clear exception was
TIM's humiliating upset in the mayoral elections in Antananarivo
last week, when Andry Rajoelina, a successful businessman but
political unknown, won a landslide victory against the appointed TIM
incumbent. His victory was considered a vote of protest against the
high cost of living, power outages, and infrastructure problems in
the capital and may serve as an "alert" to the President that
changes are in order throughout the country. It may also be viewed
as a vote for democratic diversity and against monolithic TIM
domination. President Ravalomanana was initially gracious in
conceding his candidate's defeat, but the weeks ahead will test his
ability to work cooperatively with the young new mayor and his
team.


6. (U) Through a USD 1.1 million ESF-funded program launched in
October 2006, the National Democratic Institute (NDI) has worked to
consolidate democratic practices in Madagascar by bolstering the
capacity of the Consortium of National Election Observers (CNOE) and
other civil society actors, training a cadre of domestic election
and media monitors, conducting civic education throughout the
country, and promoting dialogue among political heavyweights on the
need for electoral reform. However, the program is set to expire in
early 2008.

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MADAGASCAR - Economic
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7. (U) With a per capita GDP of about USD 255 per year, Madagascar
is one of the poorest countries in the world. More than 70 percent
of the population is estimated to live below the poverty threshold
and much of the rural population survives through subsistence
farming. However, the country does have significant economic
potential that stems from an industrious, competitive labor force
and a variety of natural resources. Sustainable development of the
country's natural resources remains a major challenge. In the short
and medium terms, considerable economic growth can arise from more
effective allocation and use of these resources.


8. (U) Agriculture plays a central role in Madagascar's economy,
contributing more than 60 percent of the country's export earnings
and 32 percent of GDP. Agriculture, fishing, and forestry employ
between 70 and 80 percent of the people. The major agricultural
exports are shrimps and spices such as vanilla and cloves.
Agriculturally based products have the greatest potential to spur
growth in the medium term and to provide broad-based poverty
reduction. However, agricultural productivity is extremely low,
even by African standards. In addition, poor natural resources
management, limited investment, poorly functioning domestic markets,
and weak linkages to international markets characterize the sector.
Weak organization of producers and traders further constrains
efforts to surmount these problems.


9. (U) The industrial sector accounts for about 13 percent of
output but rapid growth is occurring, especially in extractive
industries. Until the mines come on line, the growth comes mainly
from the strong performance of the food, tobacco, and beverage
industries where Ravalomanana's TIKO company dominates -- and U.S.
company Seaboard has had difficulty in obtaining a level playing
field. However, the President's opening speech on November 5 at the
Presidential Dialogues promised publicly, for the first time, a
level playing field and welcomed competitors in all sectors; this
attention to conflict of interest issues here is to be welcomed.
The major industrial exports are apparel and textiles, minerals, and
gemstones such as sapphires. The textile and apparel industry,
which hires about 100,000 workers, is a major source of formal
employment and Madagascar is one of the main exporters of textiles
and apparel to the U.S. under AGOA. Mining is dominated by two
major foreign projects; the QMM ilmenite mine (ore of titanium
dioxide, used primarily as a paint whitener) is already under
development and transforming the southern port of Fort Dauphin.
That investment is Anglo/Australian/Canadian in origin, as part of
the Rio Tinto group. Dwarfing that project is Sherritt's Ambatovy
nickel/cobalt mine, a 3.2 billion USD investment that is just
getting underway; the investors are Canadian, with Korean and
Japanese partners. Exxon is preparing to drill its first
exploratory well offshore in the Mozambique Channel, among a number
of foreign firms with oil/gas exploration rights here.


10. (U) The service sector, accounting for 55 percent of output,
has been a significant source of growth in recent years. Service
sector expansion is led by the tourism industry, transport services,
telecommunications, and infrastructure improvements such as road
construction or rehabilitation. However, ongoing power shortages
and the perennial mismanagement of the state utility JIRAMA
constrain the service sector and ensure that all large industrial
projects include an independent power-generation component.


11. (U) The macroeconomic situation is generally considered stable,
owing in part to adequate policy. Madagascar attained the
completion point under the Heavily Indebted Poor Country (HIPC)
initiative in 2004, thereby qualifying for substantial debt relief.
In 2005 Madagascar qualified for additional debt relief under the
IMF's Multilateral Debt Relief Initiative (MDRI). The IMF estimates
GDP growth for 2007 and 2008 at 5.6 per cent, whereas the MAP target
is for Madagascar to reach 8-10 per cent growth by 2012. Inflation
is dipping into single digits and the currency is appreciating, in
part due to the influx of foreign mining investment. The
government's budgetary performance is hobbled by an ineffective
revenue collection system rife with corruption, and by insufficient
controls over extra-budgetary spending. Structural economic reform,
including privatization, is proving to be slower and more difficult
than anticipated. Apart from the extractive industry firms, new
foreign investors do not consider the investment climate
sufficiently attractive; but without greater foreign direct
investment, the MAP growth goals will remain a distant dream.
Engaging U.S. investors, and improving the climate awaiting them
here, remain major mission goals.

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MADAGASCAR - Millennium Challenge Account
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12. (U) In April 2005 Madagascar was selected as the first
Millennium Challenge Account (MCA) country with a USD 110 million
program. Poverty in Madagascar is overwhelmingly rural. Rice
yields have consistently been among the world's lowest over the last
forty years, and fertilizer use is one-twelfth the African average.
In this setting, the most effective vehicle to reduce poverty is for
the rural poor to invest in their land, employ proven technology to
enhance productivity, improve farming methods, and sell to new
markets. The MCA Madagascar program seeks to establish the right
conditions for economic growth to ensure foreign aid effectiveness
through three projects: Land Tenure, Finance and Agricultural
Business Investment.


13. (SBU) The cachet of being selected first has now worn off -
particularly with the president. He has seen subsequent MCA
compacts, some going to smaller countries, dwarf his in size. He
also perceives - somewhat unfairly in our opinion - that the
Madagascar project is moving too slowly and without sufficient
impact. His signature impatience leads him to swing between sudden
and arbitrary changes in the existing compact - such as his
dismissal of the director some six months ago - to clamoring for a
"Second Compact" that would presumably be many times larger than the
existing one. Complicating matters further, Madagascar is now
failing all five of its "Investing in People" indicators, meaning a
second compact will not be possible without remediation. In fact,
given the political will, remediation is certainly possible and we
are not asking anything of Madagascar that is not already a MAP goal
they have enunciated themselves. Nonetheless, this may be a prickly
topic in your discussions with the president. Offsetting this is
the fact that your visit will come in the immediate wake of a DVC we
are hosting on Tuesday between MCC officials and five concerned GOM
ministers and their staffs. We are encouraged that the GOM, though
belatedly, is becoming fully engaged on the MCA eligibility issues.

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MADAGASCAR - Health and Environment
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14. (U) Madagascar's major health problems include childhood and
maternal health, malnutrition, malaria, sexually transmitted
infections (STIs),and access to potable water. The HIV prevalence
rate in Madagascar remains low, at about 1 per cent, but Madagascar
has some of the highest rates of STIs in the world, which
significantly enhances the risk for an accelerated HIV/AIDS
epidemic. Nonetheless, President Ravalomanana is committed to
fighting the spread of HIV aggressively, and the Government of
Madagascar has taken bold steps to control its spread. With the
recent launch of the President's Malaria Initiative (PMI) here, we
are now deeply engaged in helping Madagascar address what is perhaps
its most insidious public health challenge.


15. (U) Madagascar is a world biodiversity "hotspot" with over 80
percent of its flora and fauna occurring nowhere else on earth. The
natural richness of the country is unsurpassed. However, Madagascar
faces the challenge of conserving this global endowment in
biodiversity for future generations given current rates of
deforestation due primarily to slash and burn agricultural
practices. In an unprecedented response to the continued loss of
biodiversity, President Marc Ravalomanana made a commitment at the
September 2003 World Parks Congress to increase Madagascar's
protected area coverage from 1.7 million hectares to 6 million
hectares by 2008, a commitment that has been extended in the MAP.

Through USAID, we are directly engaged in helping the GOM create the
additional protected areas.

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MADAGASCAR - Security Challenges
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16. (SBU) In terms of security, Madagascar's maritime borders
continue to be of concern as a possible conduit of transnational
crime, terrorism, and illegal immigration. Madagascar cooperates
closely with us in combating terrorism and seeking to prevent
possible Al Qaeda members or others using the porous border to
transit from mainland Africa to Madagascar to train, recruit, and/or
build terrorist infrastructure. However, the human and material
resources available for this effort are limited; an island nation,
Madagascar only recently procured (from the EU) its first vessel
capable of circumnavigating its own territory. Other Malagasy
concerns, which we share, tend to be more economic in nature:
poached fisheries amounting to hundreds of millions of dollars
annually, illegal logging, and smuggling of gemstones and narcotics;
President Ravalomanana is likely to raise these concerns directly
with you. Within its limited capacity, the GOM has been a willing
partner on counterterrorism, international security, and maritime
security issues. The GOM has a small contingent in Darfur; hosted
the first international Maritime Security Conference in July 2006;
continues to maintain and use Excess Defense Article (EDA) boats
donated to Madagascar in 2003 to protect their maritime domain;
invested in increased port and airport security; and has responded
positively to AFRICOM.

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MADAGASCAR - The People
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17. (SBU) The Malagasy people, isolated on their "Red Island,"
scarcely consider themselves "African" and tend to be inward-looking
and little engaged on the issues of the mainland. Of mixed
Malay-Polynesian, African, and Arab descent, they are divided into
18 tribes, a term without pejorative overtones in the country.
There are also minorities of Indo-Pakistani, Comoran, and Chinese
heritage in the country. Ethnicity is a potential source of social
tension and conflict in Madagascar. The grievances of coastal
people against the Merina of the high plateau - grievances that
center on the issue of economic dominance - continue to simmer. The
Merina ruled much of the island prior to colonization and, with the
arrival of the French and the British, formed alliances in the
highlands with them. During the colonization period, the French
continued to develop the high-plateau, and the gap between the high
plateau and the coastal regions widened. Even though all of
Madagascar's past presidents have been from coastal areas, little
development has found its way to these outlying provinces.
Contemporary politicians have used this gap between high-plateau and
coastal regions to heighten ethnic tensions and consolidate power.
Marc Ravalomanana is the first president of Merina ethnicity and
took a bold step - which was surprisingly well-accepted - when he
named another Merina, General Charles Rabemananjara, as Prime
Minister after the 2006 election; additionally, every minister but
two are Merina in origin.

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MADAGASCAR - Your Message
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18. (SBU) In your time here, you can make a lasting impact by
encouraging the GOM's path towards consolidating democratization,
good governance, and economic reform, with an emphasis on U.S.
support for the MAP objectives. Given Madagascar's poor performance
on the MCA "Investing in People" indicators, you should urge
improvement on the indicators in order not to close the option of a
second compact. Your visit will also be a good opportunity to
congratulate Ravalomanana for holding four successful elections
within the past year and inquire of any plans for political reforms
in the coming months. You can also emphasize to the new Minister of
Defense the importance of maritime security and the need to prevent
Madagascar's maritime border from becoming a conduit of
transnational crime, terrorism, and illegal immigration. While
Madagascar is focused on its own development, insular by nature, and
thus hesitant to engage outside its borders, you might encourage
them to start doing so, perhaps by helping push for a resolution of
problems in the neighboring Comoros. Finally, your meetings can
provide a reminder of the importance of a truly level playing field
in order to attract U.S. investors.

MARQUARDT