President's 2007 Report on AGOA - Madagascar

UNCLAS ANTANANARIVO 000227 SIPDIS SIPDIS STATE FOR AF/E MBEYZEROZ STATE PASS TO USTR FLISER AND PCOLEMAN E.O. 12958: N/A TAGS: ETRD AGOA ECON PGOV MA SUBJECT: President's 2007 Report on AGOA - Madagascar REF. STATE 22438 ¶1. Per reftel, Post provides the following input on Madagascar for the President's 2007 Report on AGOA. MARKET ECONOMY/ECONOMIC REFORM/ELIMINATION OF BARRIERS -------------- -------------- ¶2. Madagascar continues to implement its program of macro-economic and structural reforms, including fiscal reforms and privatization of state-owned companies under the guidance of the World Bank and the IMF. In 2007, Madagascar's MCC Scorecard for "Economic Freedom" is passing in four of six categories. Inflation improved at the end of 2006 but remains above year-on-year targets, and by most accounts fiscal management remains inadequate. In mid-2006 Madagascar signed on to a new IMF Program and is thus benefiting from substantial technical assistance to improve these indicators. Several U.S. Treasury Advisor missions were completed in 2006 to build capacity in these areas of weakness; a Budget Resident has worked in the Finance Ministry since February. The Export Processing Zone (EPZ), mainly in the textile and apparel sector, is a main source of foreign direct investment. The December 12, 2006 extension of the third-country fabric provision of AGOA breathed new life into Madagascar's apparel sector; a production increase of at least 20 percent is expected for 2007. Large-scale private foreign investment is occurring in the mining and petroleum sectors. The GOM created the Economic Development Board - Madagascar (EDB-M) in 2006 to promote trade and facilitate investment. The GOM has taken significant steps to liberalize trade and there are no specific barriers to U.S. trade and investment. The difficulties of the U.S. Seaboard Corporation in Madagascar since entering a partnership to operate wheat milling facilities are noteworthy. During 2006, Malagasy government authorities did not adequately communicate with Seaboard representatives to address their concerns. Madagascar is a member of the World Intellectual Property Organization (WIPO) and is a signatory to the WTO TRIPS agreement on trade-related aspects of intellectual property. Two government offices share responsibility for the protection of intellectual property rights. Enforcement of intellectual property rights is limited by a shortage of trained personnel, legal capacity and resources. Political Pluralism/Rule of Law/Anti-corruption -------------- -- ¶3. The GOM continues to post a positive record on the rule of law, political pluralism, and the safeguarding of due process rights. By all accounts of national and international observers, the December 3, 2006 presidential election was free, fair, and transparent. BIANCO, the independent anti-corruption office, continues to tackle the long term challenge of overcoming a culture of corruption. The fight against graft and an insistence on integrity remain top presidential priorities. As the first country to sign a compact with the U.S. Millennium Challenge Corporation, Madagascar has a specific incentive to increase transparency and accountability. Poverty reduction -------------- ¶4. The GOM inaugurated a new development policy in 2006 called the Madagascar Action Plan (MAP) which replaces the Poverty Reduction Strategy Paper (PRSP). Donors and partners endorse the objectives and overall strategies of the MAP, while qualifying it as very ambitious. Madagascar qualified for debt reduction under the Highly Indebted Poor Countries Initiative in 2004 and the Multilateral Debt Relief Initiative in 2005. The GOM committed to allocate the resources freed by debt relief to priority areas such as health, education, roads, and direct support to communities. Human rights -------------- ¶5. The Government generally respected the human rights of its citizens; however, there were problems in some areas. Prison conditions were harsh and life threatening. Suspects often were held for periods that exceeded the maximum sentence for the alleged offenses, and lengthy pretrial detention remained a serious problem. Some government officials limited freedom of speech and of the press, and journalists practiced self-censorship. Women continued to face some societal discrimination, and child labor, including forced labor, is a problem. There were reports of trafficking in women and girls. During the year, the Government took major steps to combat trafficking and child labor. Labor -------------- ¶6. The Constitution of Madagascar and the Labor Code grant workers in the private and public sectors the right to establish and join labor unions, and to bargain collectively. Madagascar is a member of the International Labor Organization and regularly attends ILO conferences. Unions freely join and participate in international bodies and may form federations. Discrimination against union organizers is prohibited but enforcement of labor regulations is hampered by lack of government resources, particularly in EPZs. Child Labor -------------- ¶7. Madagascar continues to make progress in implementing its commitments under international child labor conventions. In June 2004, the GOM increased the minimum age for employment from 14 to 15 and provided substantial increases in fines from those who violate child labor laws. In 2000, Madagascar signed the ILO Convention on the minimum age for industrial work, and the ILO Convention 182 against the worst forms of child labor in 2001. AGOA Outreach/Technical assistance -------------- ¶8. The Mission, through its Economic and Commercial Section and USAID, assists the Malagasy administration (customs, trade, and industry departments),EPZ companies and businesses on AGOA issues. In February, an advisor from the East and Central Africa Global Competitiveness Hub helped three Malagasy-owned factories prepare for the Magic Trade Show in Las Vegas. The same consultant traveled to the show with the producers to assist in their contacts with prospective buyers. The February visit of AUSTR Liser brought into sharp focus the opportunities within apparel after the December 12 extension, but also in other AGOA product categories. The quarterly commercial bulletin published by the Commercial Section sensitizes the business community on AGOA and trade issues. MCGEE