madagascar: economic memorandum on current...

Report No. 1099a-MAG

Madagascar: Economic Memorandum on CurrentEconomic Position and Prospects and SelectedDevelopment IssuesDecember 20, 1976

Eastern Africa Country Programs II

FOR OGFICOAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

1970 US$1.00 - FMG 277.71FMG 1 - US$0.0036

1971 US$1.00 - FMG 277.03FMG 1 - US$0.0036

1972 US$1.00 - FMG 252.21FMG 1 - US$0.0040

1973 US$1.00 - FMG 222.70FlMG 1 - US$0.0045

1974 US$1.00 - FMG 240.50FlMG 1 - US$0.0042

1975 US$1.00 - FMG 214.32FMG 1 - US$0.0047

Fiscal Year

January 1 to December 31

FOR OFFICIAL USE ONLY

Foreward

This report is based on the findings of a missionto Madagascar in October/November, 1975 consisting ofMr. P. Landell-Mills (Chief of Mission), and Messrs. L. Currat(industrial economist), F. Gamble (educator), M. Purvis (agri-cultural economist), J.F. Rischard (general economist),G. Schreiber (national accounts economist), G. Sciolli (publicfinance economist)'. The draft report was discussed with theGovernment in August, 1976 and it has been subsequently updatedand revised.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be discklsed without World Bank authorztion.

MADAGASCAR

ECONOMIC MEMORANDUM ON THE

CURRENT ECONOMIC POSITION AND PROSPECTS

AND SELECTED DEVELOPMENT ISSUES

TABLE OF CONTENTS

Page No.

MAP

BASIC DATA

SUMMARY AND CONCLUSIONS ........................... i - vi

I. INTRODUCTION ......................................... I

Background .......... ............................................. 1

The Plan and the Charter ............... ... 1......

II. PRODUCTION AND INCOME ........... ..................... 4

Overall Growth .................................. 4

Uses of Resources ................................... 7

Prices ....... .................. 8

III. PUBLIC FINANCE ...... ................................. 11

Overview ........................................ 11

Current Expenditure ..... ........................ 12

Current Revenue ..... ............................ 14

Central Government Investmentand its Financing ..... ........................ 16

The 1976 Budget ................................. 17

IV. MONEY, CREDIT AND THE BALANCE OF PAYMENTS ............ 18

Money and Credit . ...... .............................*. 18Balance of Payments ............. .. .............. 21

V. MAIN ISSUES ................................ .......... 25

Agricultural Planning ........................... 26

The Parastatal Sector ........................... 28

Industrial Development ..... ..................... 29

Manpower .......................... ........... . 30

Statistics ......PECTS......................... 31

VI. FUTURE PROSPECTS ...................................................... 32

TABLE OF CONTENTS (Continued)

VII. ANNEXES

Annex I - Agriculture: Recent Developmentsand Prospects

Annex II - Manufacturing: Past Performanceand Future Prospects

Annex III - The Parastatal Sector

Annex IV - Human Resources' Planning

Annex V - Statistical Tables

IBRD 10331FEBRUARY 1973

MALAGASY REPUBLIC f 0-SUAREZ

POPULATION DISTRIBUTION - 1971dosumo

Each dot represents 2,000 inhabitants Hell-VIIe,

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DEFINITIONS OF SOC10L VOittATFlRO

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of 4 pages

ECONOMIC INDICATORS

GROSS NATIONAL PRODUCT IN 1974 ANNUAL RATE OF GROWTH i%] constant prices)

US$ Mln. % 1966 -70 1970 -72 1972-197L

GNP at Market Prices 1532.2 100.0 5.5 1.7 0.4Gross Domestic Investment 223.7 14.6 7.4 - 4.6 5.9Gross National Saving L/ 171.7 11.2 24.8 -10.0 24.1Current Account Balance - 52.1 - 2

Exports of Goods, NFS 288.6 18.8 1.8 - 0.6 - 5.9Imports of Goods, NFS 3149.7 22.8 -1.1 2.2 -14.4

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 197L

Value Added?v Labor Force'/ V. A. Per WorkerUS$ Mln. % Mln. % US T %

Agriculture 653.6 41.8 3.51 82.8 186 50.4Industry 277.3 17.8 0.24 5.7 11146 310.6Services 576.3 36 9 0.48 11.14 (134 (353.4Unallocated 54.9 3.v - - 130 35

Total/Average 1562.2 100.0 4.23 100.0 369 100.0

GOVERNMENT FINANCECentral Government

(Eg_bill.) % Of _ DP1m7: 197h 1970-72

Current Receipts 49.4 13.1 15.8Current Expenditure 43.0 11.4 12.7Current Surplus 6.4 1.7 2.9Capital Expenditures 13.3 3.5 6.8External Assistance (net) 3.3 0.9 1.2

MONEY, CREDIT and PRICES 1970 1971 1973 1974 19751lllon FMG outstanding end period)

Money and Quasi Money 55.2 58.5 65.4 67.8 81.2 82.3Bank credit to Public Sector (net) - 7.9 - 9.1 - 2.7 - 4.2 5.0 12.6

Bank Credit to Private Sector 52.8 59.7 59.5 59.8 70.0 72.5

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP 22.1 21.8 23.9 22.6 21.6 20.5GDP Deflator (1970 - 100) 100.0 103.9 106.6 119.4 147.3 155.1

Annual percentage changes insGDP Deflator .. 3.5 3.0 12.0 23.4 5.3

Bank credit to Public Sector (net) -102.6 -14.4 70.6 -59.1 116.8 154.1Bank credit to Private Sector 17.3 13.0 - 0.3 0.5 17.1 3.5

NOTEt All conversions to dollars in this table are at the average exchange rate prevailing during the periodcovered.

1/ Including current transfers from abroad.

2/ At market prices.

/ Total labor force; unemployed are allocated to sector of their normal occupation. "UnallQcated" consistsmainly of unemployed workers seeking their first job.

2 Import duties.

not availablenot applicable

!ofb pages

TRADE PAYMENTS AND CAPITAL FLOWS

BALANCE OF PAYMESTS MERCHANDISE EXPORTS (AVERAGE 1972-74

1972 1973 197h US $ Mln 7/(Millions US $)

Coffee 56.9 25.0Exports of Goods, NFS 229.7 2b5.5 288.6 Vanilla 14.6 7.2Imports of Goods, NFS 262.2 279.8 3U9.8 Cloves & clove oil 22.ii 11.3Resource Gap (deficit =-) - 5 - 3C 3 -61.2 Meat & meat products 18.6

Fish & shell fish 10.5 5.2Interest Payments (net) 2.1 2.0 3.6 Sugar 6.7 3.3Workers' Remittances - 29.3 - 22.9 -22.5 Petroleum products 13.L 6.6Other Factor Payments (net) - 12.7 - 8.2 -11.1 Chromite L.2 2.1Net Transfers 36.5 33.1 39.0 All other commodities 55.o 27.3Balance on Current Account - 359 - -7TI Total 203.L 100.0

Direct Foreign Investment 21.9 15.3 9.8 EXTERNAL DEBT, DECEMBER 31, 1)/5Net MLT Borrowing

Disbursements 12.2 26.2 23.1 US $ MlnAmortization 6.2 8.8 6.3Subtotal 6.0 17.b 16.8 Public Debt, incl. guaranteed 167.9

Capital Grants 13.3 3.8 1.X8 Non-Guaranteed Private Debt *-Other Capital (net) L.8 157 -12 Total outstanding & Disbursed 167.9Other items n.e.i 3 - I 1/Increase in Reserves (+) 6.3 10.8 -36.1 DEBT SERVICE RATIO for 197hr

Gross Reserves (end year)V/ 52.2 67.) '.L Net Reserves (end year)2/ 50.7 67.L 3L.9 Public Debt, incl. guaranteed 3.3

Non-Guaranteed Private DebtTotal outstanding & Disbursed 3.3

Imports of crude petroleum 12.2 lb.) bL.7

RATE OF EXCHANGE

US$ 1.00 FMG 1.00 IBRD/IDA LENDING, (Nov. 30 ,19?f) (Million US $)= FMG =US$

IBRD IDA1272 252.21 0.00b01)73 222.70 0.0015 Outstanding & Disbursed 25.83 6h.50197 2L0.50 O.00b2 Undisbursed 6.75 47.601975 21L.32 0.00o7 Outstanding incl. Undisbursed 32.o 114.10

1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services.

2/ Central Bank only

not available

not applicable

20 December, 1976

SUMMARY AND CONCLUSIONS

i. Over the past four years Madagascar has passed through a testingperiod of transition from which it has emerged apparently strengthened.Although the country gained independence in 1960, links with France remainedvery strong until 1972. In that year General Ramanantsoa replaced PhilbertTsiranana as President; fundamental reforms were initiated and the Coopera-tion Agreements with France were substantially revised. In January 1975General Ramanantsoa resigned and Madagascar subsequently experienced a phaseof political uncertainty, which ended with the appointment of CommanderRatsiraka as President in June 1975. A referendum held in December 1975resulted in an overwhelming vote in favor of a new constitution based on astrong presidential system and confirmed President Ratsiraka as Head ofState.

ii. The basic political orientation of the new Government has beenset out by President Ratsiraka in the Charter of the Malagasy SocialistRevolution. Major institutional and policy changes aim at placing controlof the economy in the hands of the Malagasy, promoting social justice andfostering local democracy.

iii. Greater Malagasy participation in commerce and industry is beingachieved by a substantial increase in public enterprise. The commercialbanks, insurance companies and a number of other key businesses previously inforeign ownership have been nationalized, and it is intended that the Stateshould become a majority shareholder in all enterprises of national importance.Foreign private investment is to continue to play an important role, beingregarded as a source not only of capital but also of technical expertise.

iv. To correct inequalities between different regions, investment isto be channeled to the least favored areas and as many government activitiesas practicable are to be decentralized. A radical reform of the educationalsystem is planned; all children of school age are to be enrolled in a five-year program of basic education with a curriculum adapted to the needs ofeach region. This ambitious reform calls for an additional million primaryschool places to be created by 1979.

v. The Charter makes the reform of local government a central featureof the new development strategy. The traditional village council, or"fokonolona", is being adapted to enable villagers to participate activelyin improving local conditions. The fokonolona are to undertake the marketingof crops, the retailing of essential commodities and the channeling of credit.They have begun to collect levies on the sale of produce and to use theproceeds to finance schools and other services. A hierarchy of newinstitutions based on the fokonolona is to be created to replace the existingsystem of local government.

- ii -

vi. Between 1966 and 1971, GDP in real terms rose by about five percentper annum, while the investment rate was at or above 15 percent. Following thechange in Government in 1972, a comprehensive reappraisal of economic policieswas undertaken. The major institutional reform of the economy has beenaccompanied inevitably by initial management problems. These, combined withthe recession in the world economy, have had an adverse impact on overalleconomic trends. In 1975, real GNP (in market prices) was still slightlybelow the level reached in 1971, after two years of decline in 1972 and 1973and a very slow recovery in the two following years. Per capita income in1975 is estimated at about US$195 (in current prices). Gross fixed capitalformation, having reached a peak in 1971, fell sharply (by 18 percent) in thenext year and has grown by only 1.5 percent per annum since then. In 1975, itamounted to only 12 percent of GDP in market prices. The domestic savingsrate has followed a similar trend.

vii. Agriculture dominates the economy: 85 percent of the populationlive in the rural areas, and agriculture presently contributes more than 40percent to GDP and 80 percent of export earnings. In contrast, manufacturingcontributes only 13 percent of GDP and mining less than one percent. Between1970 and 1974, agricultural output rose by 2.7 percent per annum with most ofthe growth taking place in 1974. The expansion of coffee and cotton productionin particular has been encouraging. However, the slow progress made inexpanding rice output, which has lagged behind the growth in population,is the most serious problem facing Madagascar. Large shortfalls in domesticrice production led to record rice imports in 1973 and 1974, at at total costof over US$50 million. Livestock production, too, has lagged with cattlenumbers actually declining over the past five years, resulting in a decreasein meat exports in 1973 and 1974.

viii. Between 1970 and 1974, manufacturing production grew by 3.3 percentannually in real terms. Owing to the drop in effective demand followinga poor harvest and the departure of many expatriates, a small decline wasrecorded in 1973, but there was a strong recovery in 1974. Output is mostlyprocessed agricultural products and consumer goods for the domestic market.However, for long term growth, Madagascar will need to develop exportindustries; in particular, there is potential for the further processingof raw materials. Political uncertainties since 1972 have resulted in asharp downturn in foreign private investment, such that by 1974 the netoutflow of direct investment income matched the new inflow of privatecapital. Medium and long term credit for manufacturing has fallen 30percent over the same period, which is also indicative of the drop inprivate sector investment in manufacturing.

ix. Despite world inflationary pressure, consumer prices rose byonly 6-7 percent annually between 1970 and 1973. Large increases in importprices, combined with a doubling in the price of rice, gave rise to a rateof inflation approaching 20 percent in 1974; since then, however, inflationhas greatly moderated. In an attempt to protect the living standards of theurban poor, the wages of the lower paid workers were raised approximately

- iii -

40 percent in 1974. Extensive price controls have successfully delayedthe passing OLL of increased wage costs to consumers. The net effect of

the Government's incomes, prices and tax policies has clearly been to improve

overall income distribution.

x. In the past the administration of public finance has been relativelyconservative, but the most recent budget indicates a determination to usepublic expenditure to boost development. In the period 1970 to 1974 CentralGovernment revenue grew much less than GDP, and expenditure both current andcapital actually declined in real terms after 1972. The current budgetarysurplus was reduced by more than 55 percent between 1971 and 1972, but there-after it grew steadily, financing more than one third of capital expenditurein the following three years. Since 1971 the Government has resorted to

increased internal short and medium term borrowing, but it was only in 1974,when the Treasury borrowed FMG 10 billion to finance emergency rice imports,that it reversed its traditional position of being a net depositor with thebanking system.

xi. The ratio of tax revenue to GDP has fallen from 15 percent in 1971to less than 12 in 1974, partly owing to the abolition of the cattle and polltaxes which were previously levied on the rural population. However, thecommissions now collected by the fokonolona on the sale of farm produce,although lower, have in part replaced local taxes as a source of revenue forvillage development. There is scope for increasing the tax effort, but onlygradually and after a thorough evaluation of various alternative tax measures.

xii. The investment budget has been substantially underspent recently,

particularly in 1974, indicating that problems have been encountered inproject implementation. Political uncertainties and frequent changes in

personnel have been partly responsible, but cost increases have also createddifficulties in the award of contracts. The 1976 budget provides for a levelof investment nearly double actual expenditure in 1975, but it remains to be

seen whether the capacity to implement development projects has expandedcorrespondingly. Current expenditure has also been substantially increased in1976 (22 percent); part of this increase is to enable the salaries of junior

employees to be raised. Of note, too, is a 41 percent increase in the budgetedexpenditure for education which is required to finance the proposed reform.Although revenue is estimated to grow by 17 percent in 1976, almost no current

budget surplus will be generated. However, the Government intends to useincome derived from state enterprises and part of the reserves of the cropstabilization funds to finance almost one third of the investment budget.

xiii. The banking system has undergone substantial changes in the past

three years. In July 1973, Madagascar left the Franc zone, replacing itscurrency board with an independent central bank. The opportunity has been

taken to direct credit to priority sectors and to give preference toMalagasy nationals. After stagnating in 1972 and 1973, credit to the

- iv -

private and parastatal sectors jumped 21 percent in 1974 mainly to enable theincreased cost of imports to be financed. Medium and long term credit tothese sectors have declined since 1972, reflecting the slack in privateinvestment.

xiv. Madagascar was faced in 1975 with a serious shortage of foreignexchange, principally owing to the sharp deterioration in the terms of trade.While the volume of merchandise exports grew by over 4 percent between 1972 and1974, the volume of imports was reduced no less than 28 percent by the imposi-tion of strict quantitative controls. As a result, the balance of paymentscurrent account showed a much reduced deficit in 1973. However, in 1974 theimport price index rose 63 percent while export prices rose only 34 percent,resulting in a FMG 12.5 billion (US$52 million) deficit in the current accountof the balance of payments. Net inflow of capital declined each year between1971 and 1974, the drop in private investment not being compensated fully bythe increase in public capital receipts. The external situation improvedlittle in 1975 and, by the end of the year, international reserves stood atonly US$36 million, the equivalent of five weeks of merchandise imports.However, in the first half of 1976 international reserves rose sharply,totalling almost US$67 million by mid-year.

xv. Madagascar's recent economic difficulties may be seen as theresult of adverse external trends, combined with the short term effectsof a major reorganization of the economy. Now the stage has been set fora concentrated effort to boost production so that the population may enjoysteadily improving living standards. The Charter provides a clear politicalframework; the task ahead is to elaborate in detail a plan which relatesprecise policies to the general objectives and specific projects to globaltargets. For this work greatly improved statistics are required. Particularattention needs to be given to strengthening agricultural planning, improvingthe management of state enterprises, boosting industrial investment andtraining skilled manpower.

xvi. The strengthening of agricultural planning should enable a moreeffective investment program to be formulated. There is considerable scopefor raising agricultural production, but without a detailed and well coordi-nated plan only slow progress may be expected. The main problems to beovercome include (i) poor roads, (ii) unsatisfactory marketing arrangements,(iii) an inadequate supply of farm equipment and inputs, and (iv) the lack ofcredit facilities for small farmers. At the same time, greater priceincentives could be offered, especially in those cases (e.g. meat and rice)where the producer price is below the import parity price. The expansionof rice production to enable Madagascar to feed itself is of paramountimportance. If present trends continue, the country's rice deficit couldreach 500,000 tons by 1990.

xvii. The expansion of state enterprise may have adverse consequencesfor economic growth unless satisfactory management is instituted. It isnoteworthy that where the state has progressively taken control of anestablished enterprise, the activities of the entity have usually continued

- v -

in a sound manner. However, where the state has attempted to set up atotally new organization, the results have been disappointing. The short-age of managers with relevant commercial experience has been a criticalconstraint. To achieve better management of parastatal organizations, itwill be necessary to improve the system of accounts and to develop proce-dures for internal communications so as to ensure greater coordinationbetween the different operating departments. The training of managers isof the highest priority.

xviii. If private investment in industry is to grow, steps will beneeded to clarify policy, particularly with regard to incentives andprofits, and to accelerate project preparation in those cases where thestate is a major participant. There are considerable opportunities forexpanding small-scale and artisanal industries, which could be aided bya package of services, including the supply of inputs, the marketing ofproducts and the provision of credit, backed by advice on productiontechniques and accounting methods.

xix. Madagascar is faced with a growing number of educated unemployed,yet at the same time there are acute shortages in certain categories ofskilled manpower. Out of a total population of some 9 million, growing at 3percent annually, approximately 4.4 million belong to the active labor force,of whom about half a million are in salaried employment. Over the next tenyears the active population will grow by one million, of whom less than onethird are likely to find salaried jobs. More particularly, given existingtrends it is unlikely that each year more than 20,000 will be placed in jobsrequiring a full primary education or more, yet the present output of thepost-primary educational establishments is already 17,500 per annum, and afurther 37,000 complete six years of primary education each year. Thus theeconomy's requirements for academically educated manpower would be satisfiedwithout any expansion of secondary education; the need is for increasedtechnical and vocational training carefully tailored to the demand for skilledworkers.

xx. To achieve sustained growth now requires a sharp increase in theinvestment rate. In the mission's view it would be feasible for Madagascarover the next decade to raise industrial production by 6 percent per annumand agricultural production by 3.5 percent per annum, giving an overallannual growth rate of 4 percent. This indeed would appear to be a minimumtarget if living standards are to improve perceptibly; nevertheless, itwould require a 50 percent increase in the investment rate by 1980.

xxi. The prospects for the balance of payments in the near term appearfavorable as a result of the projected improvement in world coffee prices.After 1980, the terms of trade are expected once again to move againstMadagascar, causing a widening resource gap. Assuming that exports grow atthe same rate as GDP, by 1985 Madagascar may require a net capital inflow ofUS$200-250 million, equivalent to approximately 30 percent of projectedinvestment.

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xxii. It may be concluded that, given conditions of stability whichpermit the consistent implementation of current policies, Madagascar has

good prospects of reversing the recent decline in per capita income and

achieving a steady improvement in living standards. The actual rate of

growth will depend primarily on the Government's ability to accelerate

public investment, improve the management of public enterprises, and provide

the labor force with relevant skills. It will also greatly depend on the

effectiveness of the fokonolona as an institution for promoting peasant

agricultural production.

MADAGASCAR

ECONOMIC MEMORANDUM ON THE

CURRENT ECONOMIC POSITION AND PROSPECTS

AND SELECTED DEVELOPMENT ISSUES

I. INTRODUCTION

Background

1. The present report was prepared by a mission which visited Mada-gascar in October/November 1975. It updates the economic report (No. 167a-MAG) distributed in July 1974. The latter was based on the findings ofa mission which visited Madagascar in October-November 1972, shortly afterGeneral Ramanantsoa replaced Philbert Tsiranana as President. In January 1975General Ramanantsoa resigned and Madagascar subsequently passed through aperiod of political uncertainty finally ending with the appointment of Com-mander Ratsiraka as President in June 1975. Reflecting the new politicalorientation of the Government, a major revision of internal and externalpolicies has been initiated, involving a fundamental restructuring of theeconomy. Consequently, substantial changes in the economic situation haveoccurred since 1972; these are discussed in the present report.

2. Madagascar gained independence in 1960, yet links with the for-mer colonial power remained very strong up to 1972. Within the Governmentheavy reliance was placed on French technical assistance personnel. Theprivate sector was dominated by French-owned firms and, as Madagascar was amember of the Franc Zone, France had considerable influence over monetarypolicy. After the change of Government in 1972 the Treaties of Cooperationwith France were substantially revised and many adjustments have been made.

3. Over the past four years, Madagascar has passed through atesting period and has emerged apparently strengthened. This is a majorachievement indicating a fundamental consensus in favor of national unity.A referendum held in December 1975 resulted in an overwhelming vote infavor of a new constitution based on a strong presidential system. The ref-erendum also confirmed Didier Ratsiraka as President. The Malagasy Republichas been renamed the Democratic Republic of Madagascar.

The Plan and the Charter

4. In 1973 President Ramanantsoa's Government published the NationalDevelopment Plan 1974-77, which outlined its development strategy and es-tablished production targets. The Plan envisaged a steady acceleration inthe rate of economic growth from 2 percent in 1974 to 5 percent in 1977 andcalled for a total investment, both public and private, of about US$750million (FMG 169 billion) over the Plan period. Two thirds of investment

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was to be financed from domestic resources, implying an exceptionally highlevel of domestic savings. The industrial sector was projected to growat 4.5 percent per annum and was to absorb one fifth of total investment,while agriculture was expected to grow by 3 percent, or 0.5 percent fasterthan the projected rate of growth of population. The Plan did not presentany detailed government budget projections, but it was stated that currentexpenditures would be increased at the same rate as GDP.

5. While many of the policies and objectives described in thePlan have been retained by the present Government, in a number of impor-tant respects the emphasis has changed. The basic political orientationof the new Administration has been set out by President Ratsiraka in theCharter of the Malagasy Socialist Revolution, published in September 1975.Both the Plan and the Charter proposed reforms aiming at:

(a) placing control of the economy in the hands of Malagasy;

(b) fostering local democracy; and

(c) promoting social justice.

The Charter, however, is more explicit than the Plan in its socialist orien-tation. Although it is not an economic plan, the Charter goes beyond broadprinciples to specify in certain instances a number of precise actions to betaken by the Government.

6. Control of the economy is to be achieved by a substantial increasein state enterprise. 1/ The Plan specifies a number of sectors which are tobe reserved to the State. To these the Charter adds a number of other sectorswhich the State will control through equity participation. In September 1975,the Government took over full ownership of the commercial banks, insurancecompanies and a number of key businesses on terms to be subsequently negotiated.It is intended that the State should become the majority shareholder in allenterprises of national importance. For certain activities the State has setup new state corporations; for example, the marketing of essential foodstuffs- rice, maize and groundnuts, in particular - is the responsibility of SINPA,2/while the distribution of certain imports and exports is undertaken by SONACO; 3/

1/ For details, see Annex III.

2/ Societ'e d'Interet National pour les Produits Agricoles.

3/ Societe Nationale du Commerce.

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both were made monopolies to enable the State to have full control overproducts considered vital to the economy. In future, rather than create newparastatal bodies, the Government intends to seek, where it deems necessary,either a majority or a minority share of the equity capital of foreign enter-prises through the medium of sectoral state holding companies. The Govern-ment's share will vary depending on the nature of each business. It is notintended that the State should intervene in day-to-day management, whichthe Government wishes to be based on sound business principles. Rather,through participation in meetings of the executive Boards, the Governmentwill guide overall policies to ensure they are consistent with nationalobjectives.

7. Inequalities in income and level of development between differentregions, compounded by an over-centralization of decision-making in Tanana-rive have been a source of discontent in the past. There is little dataon the distribution of income and wealth, but there is a striking contrastbetween conditions in the capital, Tananarive, and the rest of the countryand between the densely cultivated High Plateau and the arid South, wherethe population barely subsists. To correct this imbalance, the Governmentproposes, as far as practicable, to channel investment to the least favoredareas. The Charter also proposes that the regional administrations shouldbe greatly strengthened. As many government activities as practicable areto be devolved to the regions, which will be granted a large measure ofautonomy.

8. To foster local initiative a comprehensive reform of local gov-ernment was introduced in 1973. The Charter makes this reform a centralfeature of the policies of the present Government. The new system is animaginative adaption of the traditional village council (called "fokono-lona") which is being transformed into a democratic institution, gearedto development. The new system enables villagers to share in the decision-making process and thus participate actively in improving local conditions.The intention is to create a four-tier hierarchy of representative institu-tions roughly corresponding to the commune, canton, sub-prefecture and pre-fecture, with extensive powers and responsibilities. The fokonolona areexpected to engage directly in communal economic activities, such as thecollection and sale of crops to SINPA and other agencies, the retailing ofessential commodities and the channeling of credit. They are empowered tocollect levies on marketed produce and to use the proceeds to finance schoolsand other services. Fokonolona have been established throughout the country -

some 10,000 in all - a large proportion of which has already begun developmentprojects such as the construction of roads, communal buildings and smallirrigation works. l/

1/ For details, see Annex I, pp. 5-7.

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9. The Charter expresses great concern that government action shouldbe directed towards minimizing inequalities among social groups. Theintention is to reduce gradually salary differentials. An important re-lated measure envisaged is land reform; large estates which remain unex-ploited are to be subdivided and distributed to small farmers, while farmsowned by absentee landlords are to be reallocated to the sharecroppers whoactually work the land.

10. In contrast to earlier policies which sought to promote develop-ment through large state-owned and mostly expatriate managed farms and ag-ricultural development corporations, the emphasis is now being placed onsmall projects which can be planned and implemented by Malagasy at the foko-nolona level. While the main unit of production is to be the individualpeasant farmer, stress is placed on the formation of socialist cooperativeswithin the framework of the fokonolona system, both for production and mar-keting. Fokonolona are also encouraged to establish communal plots.

11. Consistent with the Charter's policies of "democratization, decen-tralization and malagasization," the Government has embarked on a radicalreform of the educational system. All children of school age are to be en-rolled in a five-year program of basic education with a curriculum adaptedto the needs of each region. The Charter envisages doubling the enrollmentat the primary level by 1979 (this would involve putting an additional mil-lion children into school) and the training of some 18,000 national service-men as teachers. At the higher levels the curricula are to be made morerelevant to the circumstances of Madagascar and its regions. The schools anduniversity are to play a major role in the mobilization of the population insupport of the reforms described in the Charter.

1/II. PRODUCTION AND INCOME

Overall Growth

12. In the period immediately following Independence in 1960, theeconomy stagnated and GDP per capita declined slightly. In 1965 a recov-ery set in, and from then until 1971 GDP grew on average by almost 5 per-cent annually, while the investment rate reached almost 18 percent of GDP in1971. In this period, the economy was characterized by a high marginalsavings rate of 40 percent and a small resource gap. The comprehensivestructural reform of the economy which has been taking place since 1972 hasbeen accompanied inevitably by initial management problems. These, combinedwith the recession in the world economy, have had an adverse impact on overall

1/ In view of the limited availability of official statistics the Missionundertook extensive work to prepare the statistical tables presented inthis report from available primary data. However, owing to major defi-ciencies in the latter, figures quoted should be treated with caution.

economic performance. Real GDP in 1975 was only 3.6 percent above the level

reached in 1970. This small increase has been spread unevenly over time, with

GDP actually falling in 1972 and 1973, followed by a slow recovery in 1974 and

1975.

Table 1: GROWTH OF PRODUCTION AND INCOME

1970 1971 1972 1973 1974 1975

GDP m.p. (current prices, bill. FMG) 249 269 274 300 376 401

GDP m.p. (1970 prices, bill. FMG) 249 260 257 251 255 259

Income effect of changes in theterms of trade (bill. FMG) - -2 -2 -4 -12 -19

GDY (1970 prices, bill. FMG) 249 258 255 247 243 240

GDY per capita (1970 prices, US$) 118 119 114 107 102 98

Population (millions) 7.60 7.82 8.05 8.30 8.56 8.84

Source: Mission estimates (Annex V, Tables 2.2, 2.4, and 2.6.

13. GDP per capita in current prices rose from US$118 in 1970 to US$182

in 1974 (on a straight exchange rate conversion). However, measured in 1970

prices, it only reached US$107 in 1974. Moreover, the cumulative losses

arising from the adverse movement in the terms of trade amounted to approx-

imately US$72 million between 1970 and 1974 (in constant 1970 prices), with

the result that gross domestic income (GDY) in 1974 estimated in 1970 dollars

amounted to only US$102 per capita. Thus, over the period 1970-74 real per

capita income declined by an estimated 15 percent, and by a further 4 percent

in 1975.

14. Between 1970 and 1974, both agriculture and industry slightly grew

considerably faster than services and public administration. In current

prices, agriculture's share in GDP jumped from 30 percent in 1970 to 42 per-

cent in 1974; this is explained primarily by the doubling in the price of

rice. The service sector showed a small decline in value added after 1971,

mainly owing to a decline in the contribution of trade, reflecting the fall in

the volume of imports. The value added of the public administration sector

declined mainly owing to the sharp fall in the number of technical assistance

personnel from 1,454 in 1970 to about 600 in 1974.

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Table 2: SECTORAL COMPOSITION OF GDP(percentages)

1970 1974 1974 Real growth(1970 prices) (1970 prices) (1974 prices) 1970-74

Agriculture 29.6 32.3 41.8 +11.5

Mining 0.4 0.5 0.5 +40.0Manufacturing 13.2 14.7 13.3 +14.0Electricity and water 1.2 1.5 1.1 +34.5

Construction 3.7 3.4 2.9 - 5.4Transport and communications 7.0 7.5 6.5 + 9.8Trade 13.5 12.5 10.7 - 5.3

Banking and insurance 1.6 2.1 1.8 +31.7

Other services 11.0 10.5 7.5 -2.5Public administration /a 13.5 11.8 10.3 -11.0Import duties 5.3 3.2 3.5

100.0 100.0 100.0

/a Including defense.

Source: Mission estimates (Appendix V, Tables 2.1 and 2.2).

15. Agriculture dominates the Malagasy economy: 85 percent of thepopulation live in the rural areas, and agriculture contributes over 40 per-cent of total GDP and 80 percent of export earnings. In contrast, manufacturingcontributes only 13 percent of GDP and mining less than one percent. Rice,the staple food, accounts for about one third of the gross value of agricul-tural production and is mostly consumed on the farm. In addition to rice, themajor cash crops include coffee, sugar, vanilla and cloves, but there is alsoa wide variety of other crops. Animal husbandry is important, too, with anational herd estimated at 8 to 10 million head.

16. Between 1970 and 1974, agricultural output rose by 2.7 percent per

annum with most of the growth taking place in 1974. There are marked annualfluctuations in the production of specific crops due mainly to varying climaticconditions. The slow progress made in expanding rice output production isthe most serious problem facing Madagascar. 1/ The production of paddy, themain cereal, has lagged behind the growth in population. While Madagascar hadbeen a substantial net exporter of rice in the 1960s, the situation has beenreversed since 1970. Large shortfalls in domestic rice production led tolarge rice imports in 1973 and 1974, costing in total US$51 million in foreignexchange. The good harvest in 1974/5 sharply reduced the need for riceimports in 1975. Two notable successes in the agriculture sector recentlyhave been the expansion of coffee and cotton. The production of coffee,

1/ The constraints to agricultural development are discussed in detail in

Annex I.

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the main export crop, rose 40 percent between 1971 and 1974, following asimilar decline between 1966 and 1971; it is grown mostly by smallholders.Cotton production has increased by almost 80 percent since 1970, replacingimports and yielding a small surplus for export. Livestock production haslagged, with cattle numbers declining between 1970 and 1974, owing to theeffects of drought and disease. On the other hand, fishing is making anincreasingly important contribution both to production and to export earnings.

17. Since independence in 1960, manufacturing has made steady prog-ress, raising its contribution to GDP from about 5 percent to 13 percent in1974. Existing factories are almost entirely devoted to the processing ofagricultural products and the production of consumer goods for domestic use.As manufacturing has expanded, the imports of non-food consumer goods havedeclined as a percentage of total merchandise imports from 42 percent in 1960to 14 percent in 1974, while imports of raw materials and intermediate prod-ucts have increased. Over the past five years the real rate of growth inmanufacturing has slowed to an average of 2.5 percent per annum; a smalldecline was recorded in 1973 followed by a strong recovery in 1974 and renewedstagnation in 1975. In 1973 a poor agricultural harvest, combined with anexodus of expatriates, resulted in a drop in effective demand. Recently, as aresult of price controls in the face of rising costs, profits were severelysqueezed.

Uses of Resources

18. As domestic income in real terms declined between 1970 and 1974 (seepara. 13), total private consumption also declined in real terms after 1972.The level of real per capita private consumption in 1974 was 10 percent belowthe level of 1970. Public consumption also declined in real terms; whileinvestment rose sharply in 1971 and, after a severe decline in the followingyear, increased satisfactorily until 1974. Gross domestic fixed invest-ment, 1/ as a proportion of GDP in current prices, fell from 14.6 percent in1970 to 12.5 percent in 1974 and domestic savings fell from 14.5 percent to10.4 percent over the same period.

1/ Actual investment may be somewhat higher as the data probably under-estimate smallholder farm investment and the construction of traditionaldwellings.

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Table 3: USES OF RESOURCES

(in constant 1970 prices: billions of FMG)

p1970 1971 1972 1973 1974 1975

Origin of Resources

GDP 249 260 257 251 255 258

Net inflow of resources /a 3 13 8 7 10 5Losses from terms of trade - -2 -2 -4 -12 -19

Use of Resources

Private consumption 167 175 182 175 171 166

Public consumption 46 51 45 42 42 42Investment 39 46 35 37 40 37

Saving

Domestic 39 39 37 35 39National (excluding transfers) 28 28 27 28 33

p = provisional.

/a Resource gap (i.e., imports of goods and services in constantprices minus exports of goods and services deflated by the import

price index).

Source: Mission estimates (see Annex V, Tables 2.4, 2.6 and 2.7).

19. Data on the composition of fixed capital formation are veryfragmentary. Private fixed investment, measured in real terms, fell in the

period 1971-73, but began to rise again in 1974. Public investment stagnated

throughout the entire five-year period. These trends are also reflected in

the decline in value added of the construction sector from FMG 9.2 billion in1970 to 8.7 billion in 1974 in real terms. Political uncertainties over thepast three years have resulted in a sharp downturn in foreign private invest-ment; the net inflow, including profits reinvested, fell from FMG 7.6 billionin 1971 to FMG 2.6 billion in 1974. 1/ Nevertheless, for the same period the

inflow of private capital was 50 percent higher than the direct investment

income outflow, although in 1974 the outflow slightly exceeded the inflow.

1/ DAC data is contradictory (see Annex V, Tables 3.3, 3.4 and 3.8) but

the discrepancy remains unexplained.

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Prices

20. The evolution of internal prices over the past five years hasbeen largely determined by two factors, namely the increase in the prices ofimported goods and changes in the domestic price of rice. The FMG price ofimports jumped by 63 percent in 1974, more than triple the cumulative increaseoccurring in the three preceding years. This increase, which in dollar priceswas 12 percent higher than the average for the non-oil producing LDCs, wasmainly due to the preponderance of rice imports, which recorded a 100 percentprice increase in 1974, and the impact of the increase in the prices ofpetroleum and petroleum products.

21. In order to stimulate rice production, the producer price of paddywas doubled between 1972 and 1974. As a consequence the retail price ofrice also nearly doubled to FMG 65 per kilo in 1974, which was neverthelessFMG 28 lower than the average cost of imported rice (c.i.f. Tamatave) inthat year. 1/ Rice constitutes a major component of the household expend-itures of the majority of Malagasies. To protect the living standards oflow income urban families, statutory wage rates were raised approximately 40percent in March 1974 for the lower paid workers. Inevitably this has givenrise to new inflationary pressures throughout the economy, but in many instancesprice controls have at least delayed the passing on of increased wage coststo consumers. 2/

22. The success of the price control measures in protecting the liv-ing standards of the low income families may be seen in the movement in theofficial price indices, which relate to the cost of living of low and highincome households in Tananarive. After jumping 22 percent between 1973 and1974, mainly as a result of the increase in the retail price of rice, the lowincome index rose only 8 percent in the twelve month period after June 1974.The high income index, in contrast, rose only 11 percent between 1973 and1974, but the rising cost of imported consumer goods caused a 14 percentincrease between mid-1974 and mid-1975. In the period June 1975 to June 1976,the low income index rose by 5 percent and the high income index by 10 percent,indicating that the rate of inflation had moderated. Nonetheless there is oneconsequence of price controls which is not reflected in the official cost-of-living indices. Scarcities of certain key commodities have risen from time totime and have resulted in the development of a black market with pricesconsiderably above the official prices.

1/ For a fuller discussion of agricultural prices see Annex I, Section E.

2/ For a fuller discussion of price controls affecting industry see AnnexII.

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Table 4: COST OF LIVING INDICES IN TANANARIVE1974-76

(1970 = 100)

Low Income Households High Income Households

Year/Month General Food General Food

1974 January 129 139 120 128April 144 161 126 135

July 145 162 127 137October 150 163 131 144

1975 January 155 172 138 153April 154 169 141 157

July 156 169 146 158October 157 169 151 160

1976 January 159 172 154 164April 162 175 158 171July 165 177 160 172

Source: INSRE (see Annex V, Table 6.2).

23. The Mission calculated a variety of indices while estimating thenational accounts aggregates in constant prices. The overall deflator forGDP in market prices was estimated at 147 for 1974, taking 1970 as the baseyear, more than half of the increase being recorded in the last year. Theprice index for private consumption was estimated as having risen 64 pointsover the same period, while that for fixed investment increased by only 34points.

Table 5: SELECTED PRICE INDICES

(annual averages; 1970 = 100)

p1971 1972 1973 1974 1975

GDP deflator 103 106 119 147 155Private consumption 104 108 125 164 181Fixed investment 103 107 115 134 139Merchandise imports 103 106 118 193 193

CoL. High income urbanfamilies /a 106 113 115 L28 145

CoL. Low income urbanfamilies /a 105 111 118 144 156

CoL. Food (low income urbanfamilies) /a 105 112 122 159 170

p = provisional.

/a = Index covers Tananarive only.Source: Mission estimates.

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III. PUBLIC FINANCE

Overview

24. Between 1970 and 1972, public expenditure, both current and capital,increased in real terms and then declined in the following years. However,availability of finance does not appear to have been the most critical factorin explaining the low level of investment in the public sector in 1973 and1974. Each year there was substantial under-expenditure on the capital budgetindicating the existence of non-budgetary constraints to the implementationof development projects. Given the political uncertainties which existed, itis not surprising that public sector investment has slowed down. Furthermore,the rapid change in personnel inevitably has had a significant impact onproject implementation.

25. Between 1970 and 1971, Central Government revenues grew by 14 per-cent, only to drop by 5 percent in the following year. In contrast, currentexpenditure continued to rise steeply (by 11 percent) and in consequence theCentral Government current surplus available for investment was reduced bymore than 55 percent to only FMG 4.6 billion. Since then there has been agradual recovery; by 1974 the current budgetary surplus had grown toFMG 6.4 billion, still well below the level achieved in 1970. Since the levelof foreign aid remained essentially unchanged, the Government resorted toincreased internal short and medium term borrowing to finance its investmentprogram, particularly in 1972 and 1973.

TABLE 6: SUMMARY OF CENTRAL GOVERNMENT REVENUE AND EXPENDITURE

(in billions of FMG)/b

1970 1971 1972 1973 1974 1975

Current revenue 38.8 44.3 42.1 45.6 49.4 52.9Current expenditure 30.8 33.8 37.5 40.5 43.0 47.5Surplus 7.9 10.4 4.6 5.1 6.4 5.5Capital expenditure 11.0 12.8 16.0 14.5 13.3 13.1Overall deficit 3.1 1.4 11.4 9.4 6.9 7.6

Financing

Foreign borrowing 3.8 2.8 2.4 5.1 3.3 n.a.Domestic borrowing 0.7 -1.6 6.1 5.8 2.9 n.a.Others /a -1.5 0.2 2.9 -1.5 0.7 n.a.

/a Includes contributions from stabilization funds, deposits with theTreasury and changes in liquid assets.

lb Provisional.

Source: Ministry of Finance and Planning (see also Annex V, Tables 5.1and 5.2).

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26. It was not possible for the mission to obtain a comprehensive viewof the overall public finance situation, as detailed accounts of the var-ious governmental and parastatal entities were not available. Changes in thegovernment structure have complicated the picture. The provincial budgetswere merged with that of the Central Government at the beginning of 1973. Thebudgets of the Ports 1/, Posts and Telecommunications, the Radio and Tele-vision Network and the National Printing Office continue to be annexed to thecentral government budget, but the railways organization was separated in 1975and is now treated as a semi-autonomous public enterprise. A number ofparastatal bodies - the most important being the crop stabilization andpension funds - maintain accounts with the Treasury, but are in other respectsautonomous. A further complication is that the government budget records onlythose investments financed by domestic funds or loans, but not those paid forout of foreign grants. The latter were reported by the OECD's DevelopmentAssistance Committee as amounting to US$17 million (FMG 3.8 billion) in 1973and US$20 million (FMG 4.8 billion) in 1974. 2/ Lastly, the large ricesubsidy, which was provided in 1974, was financed by a Central Bank loan tothe Treasury. By the end of 1974 the debt outstanding arising from ricepurchasing operations, for which the Treasury must ultimately bear re-sponsibility, amounted to over FMG 9 billion (US$37 million), equivalent toapproximately one fifth of total tax revenue in that year.

Current Expenditure

27. In nominal terms current expenditures of the Central Governmenthave recently shown sustained growth, increasing on average at 9 percentper annum between 1970 and 1975, a rate comparable to the nominal growth inGDP (i.e. 10 percent p.a.). Partly as result of taking over the budgets ofthe provincial administrations and partly owing to salary increases, a growingproportion of the central government budget has been spent on wages andsalaries at the expense of expenditures on goods and services. Sinceexpenditure in real terms has hardly increased, there has been a decline inexpenditure on goods and services in real terms; this has had some adverseconsequences for development.

1/ The port of Tamatave was separated in mid-1972.

2/ It is possible that these figures contain some funds used for currentexpenditure.

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Table 7: LEVEL AND COMPOSITION OF CENTRAL GOVERNMENTCURRENT EXPENDITURE

/a1970 1975

Billions Billionsof FMG Percentage of FMG Percentage

Wages and salaries 15.4 50 29.2 61Goods and services 10.9 35 10.9 23Transfers and subsidies 3.2 10 6.1 13Public debt interest 1.3 /b 4 1.2 3

Total 30.8 100 47.4 100

/a Provisional figures.

/b Including some amortisation payments.

Source: Mission estimates (see Annex V, Table 9.1).

28. One serious aspect of the decline in real expenditure on goodsand services has been a reduced amount of road maintenance. Notwithstand-ing large investments made in expanding the road network, expenditure onroad maintenance fell by 25 percent in nominal terms between 1972 and 1975;in real terms the decline has been much greater. The funds made availablehave been insufficient to prevent the roads from deteriorating; eventually,the cost of rehabilitating them will probably be higher than the cumulativecost of carrying out normal maintenance.

29. The mission was unable to obtain information on actual governmentexpenditure by economic function for recent years. If data for 1973 arecompared to the budget estimates for 1975, it appears that a declining pro-portion of the budget is being allocated for economic services, and thatcurrent expenditure has shifted slowly in favor of social services. Thefall in the share of agriculture, public works and transport has been moremarked than in the case of other economic services. On the other hand, theproportion of expenditure devoted to general administration, defense andsecurity has increased in the past two years, in contrast to the sharp declineregistered between 1968 and 1973.

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/aTable 8: CENTRAL GOVERNMENT CURRENT EXPENDITURE:

COMPOSITION BY MAIN FUNCTIONS(in percent)

/b1968 1973 1975

Administration 34 24 26Economic services 24 26 23Social services 32 33 34Others 10 17 17

100 100 100

/a Includes provincial budgets.

/b Budget estimates.

Source: Ministry of Finance and Planning.

Current Revenue

30. During the period 1970-74, Central Government revenue grew moreslowly than GDP, the ratio of revenue to GDP falling from 16 to 13 per-cent. 1/ A major reason for this was the heavy reliance placed on customsduties, which in 1970 contributed 34 percent of total domestic revenue;the volume of imports declined markedly between 1970 and 1974, and particu-larly sever2 restrictions were placed on the more highly taxed luxury imports.Direct taxes grew more slowly than GDP - 25 percent (in nominal terms) ascompared to 51 percent - which may be partly explained by the decline incompany profits. The poor yield from these sources was to a great extentcompensated for by the revenue derived from consumption and value addedtaxes.

31. A major change in the fiscal structure in the period underreview was the abolition of the poll and cattle taxes which used to accrueto the provincial administrations. The principal reason for eliminatingthese taxes, which by reputation were closely associated with the colonialregime, was that their administration had given rise to abuses and injus-tice and that the taxes had become increasingly unpopular. In 1972, thefinal year the taxes were levied, their total yield amounted to FMG 5.7billion, equal to approximately 12 percent of tax revenues from allsources. Other modifications of the fiscal system have included: (i) ex-tending the pay-as-you-earn collection system to cover the entire countryin 1973, (ii) the introduction in 1974 of a uniform 10 percent value added

1/ If the cattle and poll taxes, which were collected by the ProvincialAdministrations, are added to central government revenuein 1970, the ratio of revenue to GDP is 18 percent.

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tax in place of a two-tier system under which luxury goods were taxed at12 percent and other goods at 5 percent, (iii) the steepening of the gen-eral income tax schedule with a maximum rate of 60 percent on incomes aboveFMG 5 million per annum, and (iv) the raising of consumption taxes on cer-tain goods (e.g., milk, sugar, wine). Efforts, too, are being made toreduce tax evasion, mainly by the creation of special tax brigades to makein-depth examinations of the affairs of selected tax-payers. The formationof tax brigades was one of the measures proposed in the National DevelopmentPlan 1974-77; other measures, yet to be implemented, included the restruc-turing of indirect taxes, the use of wealth indicators to assess high incomeearners, merging of the personal and profit tax for individual entrepreneursand the extension of fiscal monopolies to products other than tobacco.

Table 9: CENTRAL GOVERNMENT CURRENT REVENUE 1970-75(in billions of FMG)

/a1970 1971 1972 1973 1974 1975

Direct taxes 6.6 6.9 6.5 9.3 8.2 9.3Consumption taxes 4.9 5.8 5.6 6.1 6.4 6.6Value added taxes 6.8 7.7 7.2 7.4 8.9 10.2Import taxes and duties 11.2 13.7 12.3 11.1 12.1 14.4Export taxes and duties 2.1 2.4 2.4 2.9 3.1 5.5Other indirect taxes 4.1 5.0 4.5 4.0 5.7 2.9Non-tax revenue 3.3 2.8 3.7 4.9 4.9 4.1

Total 38.8 44.3 42.1 45.6 49.4 52.9

/a Provisional.


32. The ratio of tax revenue to GDP, a measure of the tax effort of acountry, was 12 percent in 1974. This is comparable to other developingcountries, taking into account per capita income and the structure of theeconomy, although it is a little below the average for African countries.To achieve a higher tax effort careful tax planning would be required, basedon a thorough evaluation of the impact of various tax increases. For indirecttaxes, a study of price and income elasticities of particular goods is required.In particular, there would appear to be scope for increasing duties on luxuryimports; there are advantages, too, in relying on high duties rather thanon quantitative import controls to protect import substitution industries andto limit imports as a means of preserving foreign exchange.

33. With the abolition of the poll and cattle taxes, the tax burdenon the rural population has been much reduced. The imposition of producelevies by the fokonolona as a source of revenue for local developmentmay be regarded as a substitute, but the yield has been generally much

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lower. If the fokonolona are to make a significant contribution to thefinancing of local development, the levies will have to be increased. Thecontrol and management of these local funds presents a considerable admin-istrative problem.

Central Government Investment and its Financing

34. The level of central government capital investment reached a peak ofFMG 16 billion in 1972. Preliminary estimates for 1975 indicate that centralgovernment investment in that year was lower than in any of the previousthree years. The detailed breakdown by sector, data for which is availableonly for 1973 and 1974, indicates that transport receives the major share.Investment in education amounted to an exceptional FMG 900 million in 1974.

/aTable 10: CENTRAL GOVERNMENT INVESTMENT

1973-741973 1974 Percentage

(in billions of FMG)

Agriculture 4.8 4.8 34Transport 6.7 5.5 44Other 3.0 3.0 22

14.5 13.3 100

Total authorized expenditure: 17.7 21.0

/a Excludes investment financed by external grants.


35. The annual investment budget has been underspent over the past threeyears. In 1973, 82 percent of authorized expenditure was spent; in 1974 thefigure was 63 percent. The size of the budget was reduced by 25 percent in1975, but substantial underexpenditure is nevertheless expected. One of thecauses has been delays in making funds available at the beginning of the year,complicated in 1973 by the introduction of a system of zero budgeting. 1/ Amore serious problem has been the slow pace of project preparation andimplementation. Rapid inflation has created special difficulties with con-tracts, when the bids received were much higher than foreseen.

1/ This system requires executive ministries to seek renewed authoriza-tions for all budget allocations relating to ongoing projects; theobjective is to deter departments from earmarking funds which theycannot in fact spend in the current year.

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36. Recently about half of all central government investment has beenfinanced by budgetary savings. This has only been possible because invest-ment has declined. As a percentage of GDP, central government investmenthas fallen from 4.5 percent in 1970 to 3.5 percent in 1974. Foreign bor-rowing has averaged about FMG 3.5 billion over the past five years, butwithout any clear upward trend. There was little recourse to domestic bor-rowing until 1972 when the fall in revenue led to a threefold increase inthe overall budget deficit. In that year the Government raised FMG 6 bil-lion by issuing government bonds, mainly short and medium term. Since 1972,there has been a decline in domestic borrowing. Other sources of financehave included surpluses derived from the annexed budgets and transfer fromthe crop stabilization funds.

The 1976 Budget

37. The 1976 Central Government budget provides for a 22 percentincrease in current expenditure and for an investment budget amounting toFMG 24.7 billion, or nearly double the actual expenditure in the precedingyear. Current budget receipts are projected at FMG 63 billion, approximatelybalancing recurrent expenditures. The investment budget is to be financed by(i) income from investments (FMG 4.0 billion), (ii) foreign and domesticborrowing (FMG 11.6 billion), (iii) contributions from the stabilization funds(FMG 3.2 billion) and (iv) use of Treasury assets to meet the balance. Theannexed budgets are balanced at FMG 9 billion, including provision of FMG 2billion for capital expenditure.

Table 11: GOVERNMENT BUDGET ESTIMATES, 1975 and 1976(in billions of FMG)

1975 1976

Central government current expenditure 51.2 62.6Central government current revenue 56.0 63.0Annexed budgets current expenditure 5.2 7.1Annexed budgets current revenue 9.1 9.2

Central government capital expenditure 15.6 24.7Annexed budgets capital expenditure 3.9 2.1

Total capital expenditure 19.5 26.8

To be financed by:

(i) Central government currentbudget surplus 4.8 0.4

(ii) Annexed budget current surplus 3.9 2.1(iii) Investment income and stabilization

funds - 7.2(iv) Net borrowing 9.6 9.6(v) Use of treasury assets, and

other treasury operations -0.6 7.5(vi) Central Bank advances 2.0 -

Total 19.5 26.8


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38. Part of the increase in current expenditure is explained by asubstantial rise in the minimum wages of the lowest paid government em-ployees announced in January 1976. The cost of this wage rise is esti-mated at FMG 3 billion, equivalent to 5 percent of current revenue. Ofnote, too, is the increase in the budgeted expenditure for education whichhas been raised 41 percent to FMG 15.5 billion, and now amounts to 25 per-cent of the total current budget expenditure.

39. The projected increase in current revenue amounts to 17 percentover the provisional estimate for 1975. To assist in reaching this target,customs duties have been raised on a range of goods, the most notable beingimports from the EEC. A considerable increase in customs duty revenueis foreseen as a result of a higher volume of imports. A special effortis envisaged to collect tax arrears. The achievement of the revenue targetwill greatly depend on the actual growth of dutiable imports; yet, at thesame time, the development of the economy would suggest that this categoryof imports should continue to be limited so that foreign exchange might bereserved to finance investment and intermediate goods. The large estimatefor investment income from state enterprises is a new item.

IV. MONEY, CREDIT AND THE BALANCE OF PAYMENTS

Money and Credit

40. The banking system has undergone substantial changes over thepast three years. In July, 1973 Madagascar left the Franc zone, replacingthe Currency Board by an independent Central Bank. This has given the Gov-ernment the opportunity to exercise greater flexibility in the management ofmonetary matters. In particular, steps have been taken to direct credit topriority sectors and for preference to be given to Malagasy nationals. Thiswas achieved by instituting a system of prior authorization by the CentralBank for all loans and advances to firms having total outstanding credit inexcess of FMG 100 million. To encourage the commercial banks to lend toMalagasy nationals, the Central Bank discounts without prior approval, follow-ing a simplified procedure, short and medium term credit of less than FMG 5million extended to citizens for production and professional purposes.

41. Following the establishment of the Central Bank, the Governmentacquired a majority share in the equity of two of the four commercial banks.In June 1975, all commercial banks were nationalized and considerationis being given to reorganizing the banking sector to create a more rationaland efficient system. 1/

1/ See Annex III, Section IIB.

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42. After growing 11 percent in 1971, credit advanced to the privateand parastatal sectors stagnated in the two following years, only to jump by21 percent in 1974 and to fall off again in 1975. Deflated by the GDP priceindex, the level of private credit at the end of 1974 stood 9 percent belowthe level attained at the end of 1970. The expansion of credit in 1974 wasnecessary in order to finance both the increased cost of imports in generaland of imported rice in particular, in addition to the expansion in theproduction of cash crops which took place D-. that year.

Table 12: ASSETS AND LIABILITIES OF THE BANKING SYSTEM(in billi;,rs o- FMG; end of year)

1970 1971 1972 1973 1974 1975

Assets

Credit to the private sector 53 60 59 60 70 72Net credit to Government -8 -9 -3 -4 5 /a 13Net foreign assets 17 16 19 22 19 12

Total 61 67 76 77 94 97

Liabilities

Money 46 47 53 57 67 68Quasi-money 9 12 12 11 14 14Other liabilities 6 8 11 10 13 15

/a This does not include credit for the importation of rice.

Source: Central Bank and IMF (see also Annex V, Table 6.1).

43. The massive rice imports of 1973/74 resulted indirectly in a sub-stantial increase in Central Bank advances to the Central Government; creditto SONACO and SINPA, guaranteed by the Central Government, amounted to as muchas FMG 9 billion at the end of 1974. 1/ As a consequence, during 1975 theGovernment's borrowing from the Central Bank remained at the statutory ceiling,which is fixed at 20 percent of domestic revenue. Thus, between 1970 and 1975the Government shifted from being a substantial net creditor to the bankingsystem to being a substantial net debtor. This change in position was notsimply the result of mobilizing domestic resources for development; rather itwas largely a consequence of the large rice consumer subsidy, aimed primarilyat protecting over a limited period low income families from the impact of theexceptionally high price of imported rice.

1/ The advance made by the Central Bank to cover the rice subsidy wasconverted into a 25 year loan in 1976.

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44. Credit to the agriculture sector grew markedly in 1974, reflect-ing the good harvest. Although the commercial banks provide some credit forthe marketing of agricultural products, the National Development Bank (BNM) isthe principal source of agricultural credit. In 1974 no less than 98 percentof BNM's lending in the agricultural sector was in the form of marketingcredit provided to the parastatals and to private companies. Very littleagricultural credit reached the small farmers, since the BNM to date hasrestricted its credit to organized farmers. In view of the emphasis now beinggiven to rural development, the question of smallholder credit is receivingmuch greater attention. BNM makes available approximately 50,000 loansannually to small farmers and is currently operating accounts with 2,000fokonolona. For the future it is envisaged that BNM will provide group creditto the fokonolona, which will be responsible for making individual loans tofarmers and will act as guarantors.

Table 13: DISTRIBUTION OF CREDIT BY SECTOR(in billions of FMG)

1970 1971 1972 1973 1974 1975

Agriculture 9.0 9.7 10.2 10.4 15.4 13.3Commerce 14.7 15.0 13.9 15.0 18.0 15.6Mining & manufacturing 19.5 23.9 24.5 21.7 24.1 26.5Other 3.3 3.1 4.2 4.2 4.7 3.8

Source: Central Bank (see Annex V, Table 6.2).

45. Medium and long term credit to the private sector has declinedover the past three years, reflecting the lack of growth in investment.Agriculture has received an increasing proportion of this type of credit,whereas the share of manufacturing has fallen from 54 percent in 1970 to 48percent in 1975, with an estimated drop of 40 percent in real terms. Thiscorresponds to the sharp fall in private sector investment in manufacturing.

Table 14: DISTRIBUTION OF CREDIT BY TYPE(in billions of FMG)

1970 1971 1972 1973 1974 1975

Short term 36.3 39.4 39.0 38.6 50.1 48.7Medium and long term 10.2 12.3 13.8 12.7 12.0 10.4

of which:agriculture 1.4 1.3 1.8 2.0 1.9 1.7manufacturing 5.5 7.7 8.1 6.7 6.0 5.1

Total 46.5 51.6 52.8 51.3 62.1 59.1

Source: Central Bank (see Annex V, Table 6.2).

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46. The banking system is mainly concerned at present to satisfy shortterm requirements of the economy. The question for the future is whether ahigher rate of investment will find adequate support from the banking sys-tem. This may require the commercial banks to allocate a greater proportionof their credit as long term loans. Furthermore, a favorable agriculturalseason accompanied by a larger investment effort will automatically call fora substantial expansion of credit, and at this point public and private sec-tors may come into competition, giving rise to a need for careful planningof credit creation to ensure that adequate credit is channeled into highpriority sectors.

47. The nationalization of the commercial banks raises the specificissue of the desirable relationship between the state-owned banking systemand state corporations. In similar circumstances in some other countries,where both the banks and the state corporations are public enterprises, thebanks on occasion have been led to finance various potentially unviableoperations of state corporations, thereby allowing the enterprises to build uplarge debts. The Central Bank may be expected to make efforts to hold thecommercial banks to the principles of sound lending policy, but decisionsconcerning state corporations which encounter financial difficulties are oftentaken elsewhere within the Government for obvious reasons of overall nationalpolicy. A nationalized banking system, under these circumstances, couldbecome a means of channeling additional subsidies in a disguised form.Provided the banks continue to be required to operate as commercial entities,autonomous in their day-to-day operations, they would be more likely to resistpressure for lending to state corporations for loss-making ventures, thusprecipitating remedial measures when serious financial problems confront astate corporation. A related issue is the possible role of the commercialbanks in financing investment requirements of state enterprises through shortterm credit. Such practices may provide a state enterprise with the financialresources to make investment decisions which are not necessarily in accordancewith government priorities.

Balance of Payments

48. At the end of 1975 Madagascar was faced with a serious foreign ex-change constraint, principally owing to the sharp deterioration in the termsof trade. The volume of exports has grown in recent years in step with GDPand, in current value terms, somewhat slower. The volume of imports on theother hand fell 39 percent between 1971 and 1974; however, import pricesincreased by 93 percent during the same period. The current account of thebalance of payments showed a small deficit in 1970. In the following yearexpenditure on merchandise imports (f.o.b.) rose 24 percent which was notmatched by an increase in export earnings; consequently the current accountdeficit more than tripled to FMG 15 million (US$56 million). Tight importcontrols practically eliminated the trade deficit in 1972 and led to aFMG 6 billion (US$28 million) trade surplus in the next year. Despiteexceptionally large rice imports amounting to FMG 9 billion (US$38 million) in1974, Madagascar nevertheless managed to balance its trade (f.o.b.). However,net non-factor service imports have grown considerably, especially as a

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result of the decline in the exports of "other government services." 1/

The current account deficit reached FMG 12.5 billion (US$52 million) in 1974,

and is estimated to have grown further in 1975. By December 1975, inter-

national reserves stood at only US$36 million, equivalent to some five weeks

of merchandise imports. Owing partly to much improved coffee prices, inter-national reserves rose sharply in the first half of 1976, reaching US$61million in August.

Table 15: BALANCE OF PAYMENTS SUMMARY(in billions FMG)

1970 1971 1972 1973 1974

Exports f.o.b. 40.1 40.7 41.8 44.5 58.0Imports f.o.b. -39.5 -49.1 -42.4 -38.3 -58.2Trade balance 0.6 -8.3 -0.6 6.3 - 0.2Net non-factor services -3.4 -5.6 -7.6 -13.9 -14.5Net factor services -10.3 -10.8 -10.1 -6.5 -7.2Net current transfers 8.8 9.3 9.2 7.4 9.4

Current account balance -4.3 -15.5 -9.1 -6.8 -12.5

Net private capital inflows 4.6 7.1 5.3 3.1 1.8Net public capital inflows 7.1 8.3 8.1 7.5 8.0Errors and omissions -1.7 -1.3 -1.8 -0.3 -Monetary movements -1.7 2.1 -1.8 -1.2 -5.9Allocation of SDRs 0.9 0.8 0.8 - -

Changes in internationalreserves /a +4.9 +1.5 +1.6 +2.4 -8.7

/a Negative sign indicates decrease.

Source: Mission estimates (see Annex V, Tables 3.2, 3.3 and 3.4.

49. Madagascar has a great variety of exports, mostly agriculturalproducts, the principal items being coffee, vanilla and cloves. In 1974,these contributed over 41 percent of total export earnings. In volume terms,

coffee exports have grown impressively, reaching 65,381 tons in 1974, 26percent higher than in 1970. A part of the exports in 1973 and 1974 repre-sented the disposal of stocks after the expiry of the International Coffee

Agreement. 1974 was an unusually good year for vanilla, with exports at

a record level. In contrast, exports of sugar were unusually low at a time of

high world prices, partly because Madagascar withdrew from the OCAM SugarAgreement, and thus ceased to export to the Ivory Coast which had previously

been a major outlet, and partly because sales were delayed in anticipationof even higher prices. In fact, prices fell in 1975 and stocks were soldbelow peak prices. Over the period 1970 to 1974, sugar exports declined

1/ This relates mainly to the removal of French bases, which resulted in

a sharp decline in the export of government services.

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as internal consumption has grown and production stagnated. Exports oflivestock products have also shown a downward trend after 1972 for similarreasons. The most important new export item is seafood, mainly crustaceans,which increased almost six-fold in tonnage shipped between 1970 and 1974, andnow contributes over 6 percent by value of total merchandise exports. Other

than processed agricultural products, Madagascar exports as yet virtually nomanufactured goods.

Table 16: TRENDS IN PRINCIPAL EXPORT COMMODITIES(in billions of FMG)

Total Percentage ofpercentage total exportgrowth earnings in

1970 1974 in constant prices 1974

Total exports f.o.b. 40.2 58.5 + 6 100of which:

Coffee 10.9 15.6 +26 27Vanilla 3.6 4.5 +11 8Cloves 4.7 4.0 -4 7Meat and meat products 2.5 4.3 +10 7Sisal 0.7 2.5 - 1 4Sugar 1.5 1.7 -73 3Rice 3.1 1.1 -83 2Seafood 0.8 3.5 +224 6Minerals 1.9 2.9 +24 5

Source: INSRE and Mission estimates (see Annex V, Tables 3.9, 3.10 and 3.11).

50. The decline of imports in real terms in the period 1970 to 1974was particularly marked in the case of capital goods which fell by 40 percent.Imports of transport equipment, for example, fell 50 percent. The FMG importprice index for crude petroleum leapt 320 points between 1970 and 1974. Themost significant addition to imports in this period was rice; while in thepast (except in 1965) Madagascar had been a net exporter of rice, the situationwas reversed after 1970 with net imports rising to a peak of 92,864 tons in1974. During this period the FMG price of rice increased no less than 228percent. In 1973/74 the net foreign exchange cost of rice imports, allowingfor the profitable export of de luxe rice, amounted to FMG 10.5 billion (US$44million), which was more than Madagascar's total international reserves at theend of 1975.

51. To correct the trade imbalance, Madagascar has severely curtailedimports. Despite the rise in international prices, the total value of Mada-gascar's imports of non-food consumer goods in 1974 was nearly 20 percentlower than in 1971. The decline has been primarily in tobacco products, soapand cosmetics, and in textile goods, with local production largely replacingimports. Imports of beverages, dairy products and processed foods have alsobeen greatly curtailed, partly as a result of increased domestic production,

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and partly because demand has also fallen as a result of the departure of alarge section of the expatriate community.

Table 17: TRENDS IN SELECTED IMPORTS(in billions of FMG)

PercentageTotal of total

percentage merchandisegrowth in imports in

1970 1974 real terms 1974

Total imports c.i.f. 47.3 67.3 -26 100Food and beverages 4.9 12.6 -2 19(of which: rice) (0.7) (9.3) +422 (14)Other consumer goods 8.8 9.4 n.a. 14Crude petroleum 2.4 10.8 +6 16Capital goods 12.9 11.5 -40 17

Source: INSRE and Mission estimates.

52. The overall result of the price trends mentioned above has beena sharp deterioration in Madagascar's terms of trade, which has greatlyreduced the country's capacity to import. Indications are that this ad-verse trend continued into 1975. However, improving coffee prices towardsthe end of 1975 have started to reverse the downward trend; a substan-tial improvement in the terms of trade is expected in 1976 and 1977.

Table 18: FOREIGN TRADE INDICES(1970 = 100)

/a1971 1972 1973 1974 1975

Export volume 102 102 105 106 138Export prices (FMG) 99 102 106 137 128Import prices (FMG) 103 106 118 193 193Exports as "capacity to import"

(volume) 98 98 94 75 91Terms of trade 96 96 90 71 66Import prices (US$) 104 117 148 223 250Import prices for all LDCs (US$)/b 103 111 138 201 215

/a Provisional estimates.

/b Excluding oil exporters.

Source: IMF and Mission estimates.

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53. To date France has been by far the most significant trading part-ner, buying over one third of Madagascar's exports and providing approxi-mately one third of merchandise imports in 1974; in 1965, these percentageswere 45 and 63, respectively. The USA has become increasingly important,especially as a market for vanilla. Following the recent changes in foreignpolicy, great efforts have been made to diversify export markets and sourcesof supply, and it may be expected that France's dominance in trade willfurther diminish in the future. If this occurs, the Government will need toreview the present policy of linking the exchange rate to the French franc.As it is, the revaluation of the franc in relation to the dollar, whichoccured in 1975, had an adverse impact, tilting internal prices in favor ofthe consumer of imported goods to the disadvantage of the producers of exports,whose real earnings have already suffered as a result of the unfavorablemovement in the terms of trade. The weakening of the French franc during1976, however, has more than offset the exchange rate movements that tookplace in 1975.

54. Despite the departure of many French technical assistance per-sonnel after 1972, technical assistance grants increased between 1970 and1974. However, there was a decline in workers' remittances after 1972 andin the import of luxury goods typically consumed by expatriates. France'scancellation of debts amounting to FMG 6.8 billion in 1972 appears in thebalance of payments accounts as a large increase in capital grants in thatyear and there is an offsetting item under loan repayments. There was adecline in the net inflow of capital in 1972, 1973 and 1974; the fall indirect private investment has not yet been compensated by an increase inpublic capital receipts.

55. Despite the overall deterioration in the balance of paymentssituation in 1974 and 1975, Madagascar has not had recourse to the con-siderable credit available through the various facilities of the IMF.Thus, although Madagascar's payments position became critical towards theend of 1975, it had by no means exhausted its actual and potential for-eign exchange resources. As short term prospects on balance are favor-able, it would appear that foreign exchange will be much less of a con-straint to development than in the recent past. Nonetheless, since im-ports have been heavily curtailed over the past two years, it must be ex-pected that the volume of certain categories of imports will now be rapidlyexpanded. This is particularly true for spare parts for machinery whichhave been in very scarce supply.

V. MAIN ISSUES

56. The Government has taken determined steps to reform the institu-tional structure of the economy. The foremost consideration motivatingGovernment actions has been rapid malagasization. Special attention hasalso been given to measures which reduce social and regional inequalities.Progress towards these objectives has been impressive. Now the stage hasbeen set for a concentrated effort to boost production so that the popula-tion may enjoy a steadily improving standard of living.

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57. The Charter outlines the overall political orientation of thenew Government and in a number of instances describes specific policiesand actions; a great task now lies ahead to elaborate a comprehensivenational development plan consistent with the Charter. Such a plan wouldrelate precise policies to general objectives, and specific projects to globaltargets. Sector plans will need to be formulated and integrated within amacro-economic framework, and inter-sectoral links between the differentprojects will require analysis so that the investment program is effectivelycoordinated. Some of the key issues confronting the planners are discussedbriefly below. A more elaborate analysis is provided in the annexes.

Agricultural Planning

58. The rate of development of Madagascar will depend in the near fu-ture primarily on expanding agricultural production. The Ministry of RuralDevelopment and Agrarian Reform has a critical role to play in mounting anenlarged agricultural development program. Yet the Ministry lacks the staffto plan and implement such a program. It requires, first, more trainedagricultural economists. Second, it needs to develop a capacity to coor-dinate much more closely the various entities involved in agricultural devel-opment, namely, the organizations responsible for research, extension, creditand marketing. 1/

59. Given the slow rate of agricultural development over the pastdecade despite considerable effort and investment, a fundamental reappraisalof past programs is needed to provide a basis for devising new and moreeffective projects. There is much fertile land as yet unexploited. Cropyields can be greatly increased and the national herd could become much moreproductive. There is much scope for the development of specialized activitiessuch as pig rearing, poultry farming, vegetable and fruit growing. In short,the potential for increasing agricultural production appears tremendous, butin the absence of a detailed and coordinated development program only slowprogress may be expected. The problems to be overcome include (i) poor roads,(ii) unsatisfactory marketing arrangements, (iii) an inadequate supply offarm equipment and inputs, and (iv) lack of credit facilities for smallfarmers.

60. The establishment of new institutions in the rural areas basedon the fokonolona (see para. 8) 2/ provides an excellent basis for a renewedeffort to overcome many of the constraints to greater agricultural product-ivity. The fokonalona system enables the local population to take the initia-tive; through self-help, with technical assistance from the Central Government,the villages may construct feeder roads, establish repair workshops for farmequipment, arrange for the distribution of seed and fertilizer and for thecollection and sale of crops, and provide a means to channel credit to in-dividual farmers. The success of this experiment will greatly depend on thethoroughness of the training of the fokonolona leaders and on the effectivenessof the support provided by the agencies of the Central Government.

1/ See Annex I, Section C.2/ Also see Annex I, Section B.

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61. The expansion of rice production to enable Madagascar to feeditself is of paramount importance. Betwen 1961 and 1972 some US$120 mil-

lion was spent by the Government on projects designed to raise rice pro-

duction. Despite this investment, output apparently grew by under 2 per-

cent per year, one percent below the rate of growth in population. If

present trends continue, by 1990 the country's rice deficit would amountto some 500,000 tons of rice annually, costing over US$200 million in

1974 prices. The urgency of solving this problem amounts to a national

emergency. 1/ In addition to the constraints enumerated in the previousparagraph, there is a question of developing, through applied research, new

farming systems and crop varieties which are suited to the situation of the

small farmer, drawing on relevant experience elsewhere in the world.

62. Aggravating the rice problem, but affecting other commodities

as well, are the operations of SINPA, the marketing organization set up

in 1973. SINPA has a monopoly in the marketing of rice, maize and ground-

nuts. Since its inception SINPA has encountered major management problems.

Furthermore, it has lacked the transport equipment to fulfill its responsi-

bilities with the result that in some areas the crop was not collected.

Although its accounts are not up-to-date, it would appear that SINPA has

substantial financial problems, partly owing to its inadequate capital struc-

ture. Urgent and decisive action is required to enable SINPA to operateeffectively. To solve the complex logistical problems and thereby to arrive

at an optimal marketing strategy, use could be made of such management tools

as computer models. 2/

63. Little is yet known of the farmers' response to price incentives.

There is evidence from other developing countries that price incentives are

effective in stimulating production, and it is reasonable to suppose that the

Malagasy peasants are similarly motivated. In 1973/74, the Government took

the courageous decision to double the producer price of paddy, yet the impact

cannot easily be determined, partly owing to seasonal variations in crop size,

but also because of the serious marketing problems. Price increases alone are,of course, unlikely to produce significant results unless they are accompanied

by measures to ease the other constraints noted above. In a number of instances,

the prices paid to producers are well below the import parity price even wheredue allowance is made for transport and related costs. For example, the price

of imported rice remains well above the internal producer price. Meat, too,

which is in short supply, is greatly underpriced relative to international

prices. Lima beans 3/ have been exported at a price which was a multi-ple of that paid to producers. Increased producer prices would also help to

achieve a central objective of the Charter, namely the improvement of rural

living standards and the reduction of income differentials between the rural

and the urban areas.

1/ See Annex I, Section D.

2/ See Annex I, Section E, and Annex III, Section IV.

3/ Pois du cap.

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The Parastatal Sector 1/

64. In order to bring the economy of Madagascar under greater Malagasycontrol and to implement the policies enunciated in the Charter, a majorexpansion of parastatal activities is envisaged. A variety of approachesis open to the Government which may plan ahead now on the basis of recentexperience. It is noteworthy that when the State has taken control of anestablished enterprise, the activities of the entity have usually continuedin a sound, businesslike manner. Where nationalization has occurred progres-sively, accompanied by the systematic in-service training of Malagasy staff,as was the case with Air Madagascar, a high level of efficiency has beenmaintained. However, where the state has created a totally new organization,- as was the case with SINPA and SONACO - the results have not been up toexpectations.

65. The Government has drawn up imaginative proposals for extendingstate control over all the key sectors of the economy which, if followedthrough, should achieve the principal objectives of the Charter with aminimum of disruption. The main feature is the creation of sectoralholding companies through which the state may participate in the variousoperating companies. To ensure sound accounting practices a specialistauditing firm is to be established which may draw on internationalexpertise. This firm would also provide advice on modern management tech-niques. In addition, the Government is planning to institute high levelmanagement training. 2/

66. The shortage of experienced managers is a critical constraintto the expansion of the parastatal sector. The attempt to solve thisproblem by seconding civil servants has led to governmental procedures beingused in place of those more appropriate to business operations. The jobof parastatal managers has been complicated by the fact that many have beenexpected to pursue conflicting objectives, on the one hand to perform a publicservice cheaply and on the other hand to operate a profitable business. Amajor obstacle to efficient management has been the absence of detailedfinancial statements and, consequently, of many of the related managementtools, such as cost accounting and long term financial plans. Related to thisis the need to develop procedures for internal communications to ensuremaximum coordination between the different operating departments.

67. A central problem confronting state enterprise worldwide ishow to relate the remuneration of executives to results. As a start, abonus system might be adopted based on rough qualitative indicators of per-formance. Procedures for the overall control of management is also a keyissue; they must permit the organization to have sufficient autonomy toeffectively manage its day-to-day affairs, but ensure nevertheless that im-portant decisions are in conformity with basic government objectives. TheGovernment envisages that this function of control will be exercised by acontroller-general nominated by the Prime Minister.

1/ For a fuller discussion, see Annex III.2/ Provision could be made for this training by expanding the Institut

National de Promotion-Formation (see Annex II, para 24).

- 29 -

Industrial Development 1/

68. In the sixties the industrial sector was by far the most dynamic.Development was based on the creation of import substitution industries,with generous protection being offered to stimulate private investment. Inthe view of the mission, over the long term the rapid expansion of industrialactivities can best be sustained by creating competitive export industries.Given the island's geographic isolation and strong competition from otherdeveloping countries, Madagascar will experience difficulty in making thistransition, particularly as it does not appear to have any special comparativeadvantages. In the medium term there remains considerable scope for (i)further import substitution and (ii) the processing of raw materials forexport. Some of the potentially viable projects have been identified andsteps are being taken to prepare projects for financing.

69. If investment in industry is to grow, steps will need to be takento overcome the factors which have delayed project implementation in therecent past. The most important of these were policy uncertainties, lackof specificity with regard to investment incentives, a squeeze on profits,and manpower shortages in the public sector which held up major projectswith large state participation.

70. The Charter makes clear the principles which are to guide govern-ment policy in the industrial sector and clarifies the role of the privatesector. Nevertheless, some uncertainty still remains concerning the detailedapplication of the principles, and investors are likely to be cautious untilexperience with the new approach has been gained. To simplify the investmentcode, the Government is considering introducing a minimum package of incentiveswhich would be available to all enterprises which meet certain specifiedcriteria. However, these incentives will be insufficient if profits continueto be squeezed between rising costs and fixed selling prices. It is under-stood that price control is under review with the object of establishingprocedures which would enable the impact of increased costs on profitabilityto be more rapidly evaluated.

71. Many projects of importance are dependent on both direct govern-ment participation and on the provision of infrastructure. The Government,in these instances, is cast in an entrepreneurial role, but it has lackedthe staff to undertake all the detailed studies necessary. As one measure toovercome this bottleneck, the Government has requested UNIDO to provide a highlevel team specifically to help prepare industrial projects.

72. To date the development of small-scale and artisanal industrieshas been relatively neglected. The Government is very aware of the possibi-lities for such activities and has begun to formulate plans for their pro-motion. The principal proposal is the establishment of regional centerswhich may extend to producers a package of services including the supplyof inputs, the marketing of products and credits, backed by advice on

1/ For a more detailed discussion, see Annex II.

- 30 -

production techniques and accounting methods. Useful experience has al-ready been gained by CETA 1/ and other pilot projects, but so far only asmall proportion of the existing small-scale enterprises have benefited.There is much scope to expand not only handicraft production, but also small-scale manufacturing of such goods as agricultural tools, cooking oil, buildingmaterials and leather goods.

Manpower 2/

73. Madagascar is faced with a growing number of educated unemployed.While as much as 25 percent of the budget is devoted to education, at thesame time there are acute shortages of certain categories of skilled man-power. Out of the total current population of about 9 million, growing at3 percent per annum, approximately 4.4 million belong to the active population,of whom only about 500,000 are in salaried employment. The National Develop-ment Plan 1974-77 understates the seriousness of the employment situation. Asa rough approximation, in the absence of reliable projections, it is esti-mated that over the next ten years the active population will grow by onemillion, of whom less than one third are likely to find salaried jobs. Thusabout seven out of ten entrants into the labor force will be compelled to seektheir livelihood in the rural or informal sectors.

74. Of those finding employment it is unlikely that, given existingtrends, more than 20,000 each year will be placed in jobs requiring a fullprimary education or more. On the other hand the present output of the post-primary educational establishments is already 17,500 per annum and, in ad-dition, each year approximately 37,000 pupils who have completed six years ofprimary education enter the labor force. It is evident that the economy'sneeds for educated manpower would be easily satisfied in the near futurewithout any further expansion in post-primary education, provided that thecontent of the training was better related to the demand for skilled manpower.Indeed, over 10,000 young people with a lower secondary certificate arereported to be unemployed.

75. Recognizing this problem, the Charter calls for the reform ofthe educational system to make it more responsive to the needs of the country.The proposals for the introduction of a basic primary education programwith a curriculum related to local conditions seem excellent. The target ofachieving universal primary education by 1979 is perhaps ambitious and mayonly be met at the expense of quality. Nevertheless, the scheme to usenational servicemen as teachers should greatly reduce the cost per pupil.

76. The educational system currently suffers from a number of graveweaknesses. The curriculum at both the primary and secondary levels hasa literary bias, to the neglect of scientific and practical subjects. Theinternal efficiency of the system is low, with high rates of dropouts andrepetition; for example, the ratio between the actual average number ofpupil-years to obtain a primary certifiate (CEP) and the number theo-retically necessary is three to one. At the primary level the pupil/teacher

1/ Centre Economique et Technique de l'Artisanat.2/ For a fuller discussion of these issues, see Annex IV.

- 31 -

ratio is an exceptionally high 70:1, while at the upper secondary level thereare many uneconomically small classes. A very small proportion of educational

expenditure is allocated for maintenance and teaching materials such as books

and paper.

77. The implementation of the educational reforms outlined in the Char-

ter calls for the elaboration of a detailed education and manpower plan.

For this, greatly improved statistics are a prerequisite. In particular

manpower data are required as a basis for the projection of the futuredemand for skilled workers.

Statistics

78. Policy formulation, economic analysis and project planning are

all handicapped by the dearth of statistics. For example, there are no

price indices available other than those relating to retail prices in

Tananarive. National accounts are incomplete and prepared with a three-yeartime lag. There are no accurate up-to-date estimates of investment, employ-

ment, agricultural production or livestock numbers. The sectors for which

good detailed data are available are money and banking and external trade,

although little analytical use is made of the latter 1/. *The Government's

statistical services are relatively well staffed at the professional level;

the main shortage occurs at the subprofessional and clerical levels, with the

result that a heavy burden of routine collation and analysis of data is borne

by the professional staff. During 1975 a large proportion of the statistical

staff has been deployed to carry out the first national population census.

This has been a major undertaking which is expected to provide invaluable data

for planning and a framework for future surveys. In the meantime, however,

other statistical work has suffered.

79. The population census was ambitious. Efforts were made to collect

a variety of subsidiary information in addition to the basic demographic

data. Two new surveys are now under consideration - both requiring consider-able resources: one is a nationwide household budget study to provide addi-

tional information for national accounts purposes, and the other a manpower

survey. Given the need for data for planning purposes, it is possible thatthe best use of available statistical resources would be to give priority

to limited investigations focusing on the most urgent issues (e.g., a survey

of the skill structure of the labor force by sector, the collection of a

variety of price indices, the estimation of investment, etc.). 2/

1/ For example, no import and/or export price indices are being calculated,

although all trade data are stored in considerable detail on computer.

2/ See discussion of statistics in Annexes I, III, and IV.

- 32 -

VI. FUTURE PROSPECTS

80. To transform the present situat'-on of a stagnating economy intoone of sustained growth would require - sharp increase in the investment rate.To date the most critical problem does not appear to have been primarily oneof finance. In the public sector the Government has lacked a pipeline ofprojects ready to be implemented and, where projects have already been started,implementation has lagged. In the private sector both foreign and Malagasyinvestors have been deterred by the political uncertainties which have pre-vailed. Now, with a new government firmly established, the situation couldquickly improve.

81. Year-to-year changes in GDP are greatly affected by fluctuationsin agricultural output caused by variable climatic conditions. In 1974,the last year for which firm figures are available, agriculture appears tohave benefited from favorable conditions and, partly as a result, the countryregistered a 2 percent real increase in total GDP despite a 2.5 percentdecline in the services and administration sector. The National Devel-opment Plan (1974-77) had envisaged an acceleration in the rate of growthfrom a very low level in 1973 to a long term target growth rate of 5 per-cent to be reached by the end of the Plan period. Taking into account morerecent events, and in particular the Government's intention to restructurethe economy and the high priority attached to certain social objectives,the Mission projects that the economy will grow at about 4 percent per annumover the next decade, with industry growing somewhat faster (6 percent) andagriculture a little slower (3.5 percent), but still faster than populationgrowth. Indeed, this would be a minimum growth rate if living standards areto improve perceptibly, yet on the assumption that the incremental capitaloutput ratio is approximately 4, 1/ the projected growth rate could only beachieved if the ratio of fixed capital formation to GDP were to be raised30 percent to about 16 percent of GDP by 1980. A simple macro-economic modelindicates that over the next four years savings would have to grow by 16percent per annum and consumption growth would have to be restrained to under3 percent per annum, implying no growth in private per capita consumptionuntil after 1980. This may be judged on political grounds to be excessivelyaustere, but a higher level of consumption could only be achieved in the shortterm by increasing further the rate of growth of agriculture. It is to behoped that the Government's next plan will indeed detail a development programaimed at a higher rate of growth.

1/ The historical ICOR appears to have been much higher, but was relatedto a period of very slow growth. Data from other LDCs with a similarstructure indicate that with a higher level of investment and fastergrowth than in the past, Madagascar could reasonably expect an ICORof 4.

- 33 -

Table 19: PROJECTIONS OF MACRO-ECONOMIC AGGREGATES1976-85

(in constant 1974 prices)

Annual Annual1976 Average 1980 Average 1985

billions Growth rate billions Growth rate billionsof FMG 1976-80 in of FMG 1980-85 in of FMG

GDP (at marketprices) 390 4.0 456 4.3 563

Terms of Trade Gains 5 . 4GDY 395 3.9 460 4.1 563Imports of goodsand NFS 82 5.1 100 4.7 126

Exports of goodsand NFS 71 4.3 84 5.2 108Resource gap 6 18.8 12 8.5 18Consumption 1/ 360 2.5 397 4.2 488Gross fixed invest-ment 41 16.4 75 4.5 93

Gross domesticsavings 35 15.8' 63 3.6 75

Net capital inflow 10 8.8 14 10.5 23

1/ Including stocks.

Source: Mission projections.

82. The Mission projected that between 1976 and 1980 exports, whichare mainly agricultural products, would grow by 4.3 percent per annum, slightlyabove the growth in agricultural output. Imports would grow about one percentfaster, but this does not give rise to a marked widening of the resource gap.Madagascar should benefit from an improvement in the terms of trade owing prin-cipally to the high price projected for coffee exports. After 1980, the termsof trade will once again move against Madagascar if, as is expected, the worldsupply of coffee expands faster than demand. Difficulties may also confrontthe two other major exports - vanilla, owing to competition from synthetic sub-stitutes, and cloves, owing to increased production in Indonesia which is themain export market. Taking such factors into consideration, it is likelythat there will be a widening resource gap, and by 1985 Madagascar may re-quire a net capital inflow of US$200-250 million per annum, equivalent toabout US$100-125 million in 1976 prices, or approximately 30 percent of totalinvestment. This level of capital inflow would seem to be reasonable inMadagascar's circumstances and should easily be attainable.

83. If external capital is secured in the amounts projected and theeconomy expands as described, the debt service ratio will remain at about4 percent of export earnings during the remainder of the present decade,

- 34 -

but will start to rise thereafter when grace periods on debt repayments beginto expire, reaching 7 percent in 1985 and 14 percent in 1990. These calcula-tions assume that one-third of external financing will be in the form ofgrants and direct investment, and that of the remaining loan capital 40percent would be on concessionary terms 1/ and the rest medium and short termcommercial loans. The grant element in the external loan capital would, inthese circumstances, fall from 76 percent in 1975 to 53 percent in 1985.

84. It may be concluded that, given conditions of political stabil-ity which permit the systematic implementation of the policies of the Govern-ment, Madagascar has good prospects of reversing the recent decline in percapita income and achieving a steady improvement in living standards in percapita GDP. The actual rate of growth will depend primarily on the investmenteffort and on the success the Government will have in improving the managementof public enterprises, in providing the labor force with relevant skills, andin promoting agricultural production. The balance of payment prospects arefavorable until 1980, but thereafter the outlook is uncertain, given thedependence on the world market for coffee, cloves and vanilla.

1/ Average terms assumed to be 5 percent p.a. interest, 5 years of graceand a 20 year maturity.

ANNEX I

AGRICULTURE

RECENT DEVELOPMENTS AND PROSPECTS

TABLE OF CONTENTS

Page No.

A. TRENDS IN AGRICULTURAL PRODUCTION: AN OVERVIEW .... ...... I

B. THE STRATEGY FOR RURAL DEVELOPMENT .... ........... 4

The Plan and the Charter ..... .................. . 4

The Fokonolona System ..... ...................... 5

C. AGRICULTURE SERVICES .................................... 7

Organization of the Ministry .... .................. 7

Planning ....... ................................. . 9

Statistics .......................................... 10

Development Projects ..... ........................... 11

Credit ............................................... 12

Research ............................................ 13

Education and Training ..... ......................... 14

D. PROSPECTS FOR THE PRINCIPAL CROPS AND LIVESTOCK .... ...... 16

Rice ................................................ 16

Coffee .............................................. 19

Cloves .............................................. 21Vanilla ............................................. 23Pepper .......... ..................................... 23

Fats and Oils ....................................... 26Sugar ............................................... 26

Animal Feed ........ ................... .............. 27

Cotton .............................................. 27Tobacco ............................................. 27

Other Commodities .... ............................... 28

Livestock ........................................... 28

E. AGRICULTURAL MARKETING AND PRICING ....................... 31

Export Crops ... ............................................. 31Domestic Marketing .. .................... ............ 34

Retail Marketing and Prices .... ..................... 36

F. IN CONCLUSION ...................... ...................... 38

ANNEX IPage 1

AGRICULTURERECENT DEVELOPMENTS AND PROSPECTS

A. TRENDS IN AGRICULTURAL PRODUCTION: AN OVERVIEW

1. Although total agricultural output in current prices increased byover 85 percent between 1970 and 1974, the increase in real terms was only

about 11.5 percent. Most of this growth occurred in 1974, which was an excel-lent crop year. Since the population is now estimated to be growing at 3percent per annum, per capita agricultural production has declined slightlyover the past five years. While the Malagasy do not yet suffer from wide-spread undernourishment and average per capita calorie supplies appearadequate, the slow growth of agricultural production has led to costlyimports of rice and vegetable oils and declines in sugar and meat exports.

Table 1: AGRICULTURAL PRODUCTION 1970-74

(FMG billion)

1970 1971 1972 1973 1974

Gross Output 1/ 100 109 119 134 187Value added 17 74 80 84 99 157Production index (1970=100) 100 99 101 104 111

1/ Current prices.

Source: INSRE and Mission estimates (Annex V, Tables 2.1, 7.3and 7.4).

2. The low rate of growth of the agricultural sector is due pri-marily to the relative stagnation in rice and livestock production. Nev-ertheless, the relative share of cereals in the total value of productionhas increased markedly as a result of the doubling of the producer price

for paddy. Owing to the preponderance of rice and livestock in total out-put, the satisfactory performance of several sub-sectors - notably indus-trial and export crops, fruits, vegetables, fisheries and forestry prod-ucts - has been concealed.

ANNEX IPage 2

Table 2: COMPOSITION AND GROWTH OF AGRICULTURALPRODUCTION, 1970-74

CumulativeProduction 1970 Production 1974 Growth% composition % composition 1970-74(1970 prices) (1970 prices) (1974 prices) %

Cereals 28 27 33 9Starchy foods 9 8 7 -2Fruits 3 5 5 97Vegetables 3 3 3 19Export and industrial

crops 21 22 17 17Livestock 26 22 22 -3Fish 3 3 4 30Forestry products 8 9 10 27

Total 100 100 100 11

3. Exports of agricultural commodities still contribute about 70percent of total export earnings. 1/ 1974 was a record year for vanilla, andshipments of coffee almost equalled the record level attained in 1973.Exports of fish - notably shrimps - more than doubled in 1974 alone, for anoverall increase of almost 500% since 1970. On the other hand, exportsof rice, sugar and livecattle were substantially lower. In value terms,agricultural exports increased 35 percent in the same period, reflecting thegeneral increase in commodity prices. In particular, Madagascar benefittedfrom the sharp increase in the prices of sisal, sugar and clove oil.

4. Madagascar is fortunate in having a wide array of agricultural exports.Although the share of coffee, vanilla and cloves in total agricultural exportearnings 1/ has increased slightly over the last ten years from 49% to 51%,the recent decline in meat, rice, sugar and groundnut exports has been essen-tially offset by noticable increases in export earnings from sisal, lima beans(pois du cap), fish and clove oil. Coffee, which now contributes just overone fourth of total export earnings, is likely to become an increasinglyimportant source of foreign exchange over the next five years. This is theresult of two factors, namely expanding production and the soaring world priceof coffee. It is noteworthy that coffee, cloves and vanilla are all mainlyproduced in limited areas on the east and northwest coasts which are frequentlydamaged by cyclones.

5. Imports of food and beverages have increased sharply in the pastfive years, the main items being rice and edible oils. Prior to 1971 riceimports were negligible; in the past ten years Madagascar was only once a netimporter of rice. 2/ Imports rose to a record level of 99,000 tons in 1974,

1/ Including processed agricultural products.I/ 1965.

ANNEX IPage 3

but fell to approximately 40,000 tons in 1975. Rice alone accounted for 76percent of all food imports in 1974 and 14 percent of total merchandiseimports. Vegetable and animal oil imports amounted to 3 percent of totalmerchandise imports. Exports of groundnuts - once a major item - were stoppedin 1975 as part of a program to expand the domestic manufacture of vegetableoil.

Table 3: FOOD IMPORTS, 1970-74

(FMG thousand)

1970 1971 1972 1973 1974

Total food imports a/ 5,743 8,861 7,046 8,263 14,931Of which: Rice 668 1,820 1,223 2,869 9,259

Fats & oils 514 1,152 729 762 2,092

Total merchandiseimports 47,346 59,262 51,755 45,155 67,257

a/ Food (unprocessed, semi-processed and processed), beverages,tobacco, oils and fats.

Source: INSRE (details see Annex V, Table 3.14).

6. Stagnant agricultural production is mirrored in the import datafor agricultural inputs. For example, not only is little fertilizer im-ported, but also the amounts imported have declined. During 1974 theGovernment decided not to import fertilizer on its own account in orderto economize on foreign exchange. This decision inevitably had an adverseimpact on its extension programs, since over the years Ministry of RuralDevelopment staff have striven to persuade farmers to use fertilizer.

Table 4: FERTILIZER IMPORTS (1970-74)

(Tons)

1970 1974

Nitrogen fertilizer 4,887 4,737Phosphate 5,247 705Potash 3,467 3,989Compound fertilizer 15,849 2,856Other, including guano 896 474Urea 10,555 7,732

Source: INSRE.

ANNEX IPage 4

B. THE STRATEGY FOR RURAL DEVELOPMENT

The Plan and the Charter

7. The National Development Plan (1974-77) states that the basicobjectives are self-sufficiency in food, expanded agricultural exports,investment in import substitution industries for inputs (notably in fer-tilizers and agricultural tools) and increased processing of agriculturalproducts. The Plan lists a number of production targets for 1977, but themanner in which the targets are to be realized is not elaborated in anydetail.

1/Table 5: AGRICULTURAL PRODUCTION PLAN TARGETS 1977

1970-77Commoditi % Increase

Paddy 32Maize 84Potatoes 59Sugar cane 13Groundnuts 45Cotton 114Coffee 35Cloves 2/ 60Vanilla (dry) 2Beef 46Pork 94Fisheries 33

1/ For details see Annex V, Table 7.1.

2/ The increase is based on a four-year moving average.

Source: The National Development Plan, 1974-77.

8. The basic objectives set out in the Plan have been restated, andin some respects revised, by President Ratsiraka's Charter of the SocialistRevolution. The Charter focuses on the structural reform of the economy,and understandably provides little guidance with regard to specific actionswhich will increase agricultural prodActivity. It calls for land reform toachieve greater social justice and as a precondition to the intensificationof output. The details of the proposed land reform have not been worked out.The intention is to outlaw sharecropping which is widespread, particularly

ANNEX IPage 5

on the High Plateau, and to subdivide large land holdings where the landis not beneficially occupied by the owner. Yet most of the large estates,especially those in foreign hands, are devoted to a few industrial crops -notably sugar and sisal. The likely impact of land reform on agriculturalproductivity is difficult to predit, but in this matter nothing could bemore damaging than continuing uncertainty. Land reform, when necessary,should be done quickly.

9. The Charter also emphasizes the role of socialist cooperatives asa means of liberating the peasant from exploitation. The Charter states thatthe cooperative system is an essential factor in agricultural developmentbecause divided and tiny land holdings constitute the principal obstacle toagricultural development. The concept of socialist cooperatives is seen asbeing consistent with the traditional fokonolona system.

The Fokonolona System

10. Both the Plan and the Charter give particular emphasis to thefundamental reform of the local government system initiated in 1973. Thebasic objective has been to create new democratic institutions at the vil-lage, commune and prefectural levels through which villagers may share in

the decision-making process and be encouraged to participate actively indevelopment. Prior to the reform, decision-making was centralized inTananarive and there was little popular participation in government. Thereform thus aims at the decentralization of government by strengtheninglocal institutions and according them increased authority for local affairs.

11. The legislation creating the new structure, promulgated in 1973,envisages a four-tier hierarchy of representative institutions known asthe fokonolona, the firaisam-pokonolona, fivondronam-pokonolona and thefaritany, in ascending order of importance. These correspond roughly,though not entirely, to the commune, canton, sub-prefecture and prefec-ture. The reform builds on and adapts a long-established Malagasy insti-tution - the fokonolona - the traditional village community.

12. The basic unit of the new system is the fokontany, which is theterritorial area of the fokonolona. All residents of the fokontany - gen-erally numbering between 500 and 2,000 - are by definition and by obliga-tion members of the fokonolona. All adult members are required to partici-pate in fokonolona assemblies. The powers and responsibilities of the foko-nolona are extensive, covering public order, land tenure and use, mutualassistance, primary education, public health, the regulation of socialdisputes, and more generally, economic development matters. Though thereis no formal budget, the fokonolona is empowered to raise revenues and bor-row money. By law, majority decisions of the fokonolona are binding onall residents of the fokotany. For day-to-day management the assemblyelects an executive committee. For specialized matters sub-committees maybe appointed, among them an economic sub-committee (the vatoeka) which is

ANNEX IPage 6

responsible for the sale of agricultural products, for supplies and gen-erally for cooperative activities.

13. The firaisam-pokonolona groups between five and ten fokontany.Its general assembly is composed of the elected representatives of thefokonolona. Its powers and responsibilities are similar to those of thefokonolona, but are limited to issues which affect more than one fokonolona.The higher levels - yet to be constituted - will reflect the same principles,but with increasing levels of power and responsibility.

14. By mid-1975 fokonolona had been organized throughout the country,some 10,000 in all, of which about 20 percent were regarded as firmly es-tablished with fully active vatoekas. Steps were being taken to form thefiraisam-pokonolona, but these were as yet in their early stages.

15. The activities of the fokonolona fall into two main categories:the administration of local affairs and development activities. With re-gard to the latter many vatoeka have embarked on small-scale ventures, in-cluding the constuction of roads, communal buildings, small irrigationworks. Notably, some 3,000 schools have already been built. The vatoekahave been given responsibility for the local collection of agriculturalproduce. Small private traders have not been eliminated, but a number ofvatoeka are establishing community shops which are granted exemption fromthe profits tax for an initial period of three years. The vatoeka may alsoprovide a vehicle for channelling credit to peasant farmers.

16. The Government has played a vital role in promoting and organiz-ing the fokonolona to date and retains quite close controls over their oper-ations and activities. The Ministry of the Interior, through its local offi-cials, has had primary responsibility for explaining and mobilizing thefokonolona. The sub-prefects and prefects must approve all decisions oflegal or financial importance.

17. The fokonolona have occasionally cultivated land on a communalbasis, though communal farming is not regarded as an essential element inthe reform. Rather, stress is placed on cooperative activities eitherwithin the fokontany or covering a larger area. Cooperative principlesare seen by the Government as entirely consistent with the concept ofthe fokonolona.

18. To assist the new institutions, support committees have beenestablished through which central government staff may provide technicaladvice. The Government recognizes too that there is a critical need totrain members of the vatoeka in the supervision of small-scale civilworks, in marketing and in book-keeping. The guiding principle hasbeen to advise, motivate and train the fokonolona's representatives,but not to impose any activities on them.

ANNEX IPage 7

19. To encourage development the provincial authorities have dis-tributed ad hoc grants in support of specific projects; 900 million FMGwas included in the 1975 central government budget for this purpose.However, the fokonolona's main source of revenue have been commissions onthe sale of agricultural produce, which has to some extent taken the place ofthe head tax and cattle tax abolished in 1973. By mid-1975 the fokonolonashad accumulated nearly FMG 2 billion in cash reserves, though these as-sets are very unevenly divided among the different regions.

20. The Government intends that rural development should be centeredon the fokonolonas. This implies a major shift in orientation away fromlarge-scale projects, requiring sophisticated management, to "mini" and"micro" schemes within the technical and management competence of thefokonolonas. Inevitably there are massive problems in designing and im-plementing a coordinated national program composed of such projects. Asa start, there are considerable opportunities to adapt existing regionaldevelopment projects to increase the participation of the local fokono-lonas. However, until the entire pyramid of institutions is in place itwill be difficult for the Government to integrate local, regional and na-tional planning.

C. AGRICULTURAL SERVICES

Organization of the Ministry

21. The Ministry of Rural Development (MDRRA) was reorganized inSeptember 1975, the tenth reorganization since 1960. The main change onthis occasion was the addition of a new Department of Agrarian Reform.The new organization is depicted in Chart 1-1. In terms of budget andstaff, the Departments of Agriculture and Rural Engineering are predomi-nant. The provincial services remain unchanged, with the four departmentsof Agriculture, Rural Engineering, Livestock, and Forestry each havingtheir own independent staff. The two strongest departments, judged interms of direct involvement in operations, are Rural Engineering and For-estry. The other two operational departments are mainly involved in pro-moting production indirectly through extension work and the provision oftechnical services.

22. For the implementation of major production projects the Govern-ment has resorted to the use of a wide range of parastatal organizations,which are intended to have the budget and decision-making flexibility nec-essary for the efficient management of production activities. Marketingand price determination for agricultural commodities are the responsibilityof SINPA 1/, the ten Stabilization Funds and, to some extent, the Ministry

1/ See also Annex III for a fuller discussion of SINPA.

Chart 1-1: Organigramme of the Ministry of Rural Development and Agrarian Reform

General -…---- Minister --------------------------------- CabinetSecretariat I

- General Affairs Service- Legal Affairs Service- Agricultural Education and

Training- Liaison and Economic Docu-

mentation Service

Department of Department of Department of Department of Department of DepartmentProgramming Agriculture Livestock and Rural Engin- Water, Forests of Agrarian

Marine Fisheries eering and Soil Con- Reformservation

- Central Service of - Agricultural - Livestock - Hydrology - Water, Forest - Rural StateRegional Programming Extension and Soil land Affairs

Service - Veterinary - Rural Equip- Conservation- Agricultural Statis- ment and - Rural

tics Service - Crop Protec- - Marine Agricultural - Wildlife Pro- Topographytion Service Fisheries Industry tection and

- Intervention Units Management of - Land TenureService - Agricultural - Provincial - Management State Forests and Con-

Inspection Services of Irrigation solidationParastatal Service Networks - Reforestation,organizations Forestry Devel- - Migration

- Provincial - Agricultural opment and For-- Marketing Agricultural Machinery est Industries

Services

- Provincial - Provincial

Services Services

ANNEX IPage 9

of the Interior and the Ministry of Transport and Supply. Responsibil-ity for research rests with the National Center for Applied Research ofRural Development (CENTRADERU). Since all these parastatal organiza-tions are quasi-autonomous, being governed by Executive Boards of whichthe MDRRA is a minority member, the latter has at best only partialcontrol over key aspects of agricultural development,namely: investment,pricing, marketing and research. What is more, it lacks the staff toexercise effectively its supervisory and coordinating functions (tutelle)vis-a-vis the parastatal sector.

Planning

23. The capacity to undertake planning within the MDRRA is weak,partly because there are no fully trained agricultural economists on itsstaff - its Department of Planning is seriously understaffed - and partlybecause of the lack of useful, reliable and up to date statistics. Atpresent it would appear that the only substantive planning being carriedout is project programming within the framework of the annual budget.The Government's basic strategy of self-sufficiency in food and the devel-opment of linkages with input and processing industries appears eminentlysound, but the detailed medium and long term implications have yet to beelaborated.

24. Little project preparation and evaluation is being undertakenby the Department of Planning. To some extent this deficiency is compen-sated for by the fact that some projects are prepared within the opera-tional departments, most notably in the Departments of Forestry and RuralEngineering. For example, the latter has prepared proposals for the local-ization of the abbatoirs, for cold stores, for rice milling and storageand studies on oil milling and coffee processing are under way. That thisactivity is located in the Rural Engineering Department is indicative of aneed to strengthen the central planning capacity of the MDRRA.

25. In the past almost all basic studies for planning were carriedout by consultancy firms. There is an impressive volume of reports, stud-ies and resource inventories, to the extent that there has been an imbal-ance between the preparation of such reports and their use. Frequently,too, studies have been left without any follow-up activities for so longthat they have become outdated. There has been a tendency also to seekcomprehensive information before commencing planning, which can be extremelycostly. Better results might be achieved if a problem solving approach wasadopted in the employment of consultants.

26. A Rural Development Service has recently been established in theDirectorate of Planning of the Ministry of Finance and Planning. This hasa professional staff of three university graduates, only one of whom is

ANNEX IPage 10

an economist by training. Although the division of responsibility for plan-ning between the Directorate of Planning and the various technical minis-tries is not entirely clear, it seems evident that at the present levelof staffing, the Directorate must play mainly a coordinating and evaluatingrole. Primary responsibility for agricultural planning remains, and shouldremain, in the Ministry of Rural Development and Agrarian Reform.

27. Measures which might be taken to improve agricultural planningand programming include:

(i) training more senior staff in agricultural economics withparticular emphasis on project analysis and applied econo-mic techniques;

(ii) greatly strengthening the Department of Planning in theMDRRA and enhancing its status so that it could effectivelyoversee the activities of the technical departments and theparastatals;

(iii) undertaking long term studies (with a 10 to 20 year horizon)of such questions as commodity demand and trained manpowerrequirements;

(iv) defining better the data needs for planning.

Statistics

28. The lack of reliable agricultural statistics is a serious obstacleto effective planning. Aggregate data on crop areas, yields and production,and on livestock have been based mainly on administrative returns. Thesesuffer not only from inevitable qualitative deficiencies, but also arecompiled with substantial delays. For example, as of November 1975 dataon production in 1974 was not available. Madagascar did not participate inthe FAO 1970 World Census of Agriculture; however, a sample survey of tra-ditional agriculture was carried out in 1961/62 using the FAO World Censusformat. This survey, published in 1966, focussed on sedentary agricultureand excluded livestock ranching. It provides the only general informationon characteristics of farm operations (farm size, number of plots, distancefrom markets, family characteristics, cultural methods, land tenure, etc.)in Madagascar. It did not yield much information on production.

29. In the past estimates of cattle numbers were prepared by the localauthorities in conjunction with tax collection. The Livestock Departmentwas not involved in preparing these estimates. No new data has been pre-pared systematically since the abolition of the cattle tax in January 1973,though data on compulsory vaccinations gives some indication of the size anddistribution of the herd. Inevitably statistics derived from administrativeactivities lead to substantial under-counting, which cannot be easily eval-uated.

ANNEX IPage 11

30. The Agricultural Statistics Service of MDRRA is well aware of theexisting deficiencies in agricultural data and, over the past decade, has

carried out a number of socio-economic sample surveys for specific commodi-ties such as vanilla, rice and groundnuts. The studies have demonstrated

a capacity to conduct field surveys and process large amounts of data.

31. The rice production survey, carried out in 1973/74 with FAOassistance, was very ambitous. An enormous amount of descriptive datawas collected which is being processed with difficulty and which is un-likely to be of any immediate use. The survey is being repeated for thecurrent season and is being extended to cover other major crops. A more

modest survey focused on production aspects (area, yield, inputs, prices,

etc.) would be more useful and less costly.

32. The difficulties of data collection in a large country with poortransport facilities and isolated farming areas are enormous. The MDRRAhas made considerable efforts to improve statistics. Hopefully these ef-

forts may in the future be more clearly focused on the information needsfor planning and for the control and execution of development programs.This will only be possible if the machinery for data collection is further

strengthened.

Development Projects

33. There are numerous ongoing agricultural projects. They fallinto two major categories: (i) commodity projects ("Grandes operations");(ii) direct production projects. The Ministry of Rural Development andAgrarian Reform has direct responsibility for the former, but only anindirect responsibility for most of the latter. The commodity projectsare typically extension-type programs in which the Ministry provides sub-sidized inputs such as seed, fertilizer, and extension inputs to farmers.The Ministry also has a number of small state farms which make an insig-nificant contribution to output, but have importance as research centersand pilot projects, especially for livestock and for new and minor crops(apples, tea, oil palm, coconuts).

34. The commodity projects have generally had only limited successin introducing new techniques, in expanding the use of production-increas-ing inputs and in stimulating investment. They have been poorly supportedby credit, have suffered from ineffective extension agents and have ex-perienced considerable problems of administration and control. A number

of projects have overlapped. The salaries of extension staff continue toabsorb a major part of the Ministry's budget.

35. The direct production projects have been entrusted for the mostpart to parastatal companies which are not under the direct control of theMinistry. Some of these have been long-established (e.g., FIFABE, SOMALAC),but many are of recent creation. A number of these schemes are associatedwith large-scale irrigation projects. The effectiveness of these agenciesin solving the management and technical problems facing them has yet to

be demonstrated (see Annex III).

ANNEX IPage 12

Credit

36. The National Development Bank (BNM) is the main lending agencyproviding agricultural credit. The Bank has increased its total lendingfrom FMG 4 billion in 1971 to FMG 24 billion in 1974. Lending to agriculturewas about 60 percent of the total in the period 1966-72, but by 1974 this hadincreased to 81 percent.

37. - BNM distinguishes between commercial agriculture 1/ and small-holder loans 2/. The former accounts for 99 percent of all agricultural loansand takes the form of standard commercial credit to parastatals, privatecompanies and large-scale individual farmers. 98 percent of this credit wasfor marketing loans (principally to SINPA) and to the various stabilizationfunds.

Marketing Credit 1974(FMG Million)

Rice 11,197Pois du cap 1,649Vanilla 1,630Coffee 1,636Cotton 1,002Sugar Cane 637All others 632

18,363

In short,. in 1974 agricultural marketing credit accounted for 76 percentof BNM's entire lending to all sectors.

38. It is evident that supplying agricultural credit for invest-ment or production to small-scale farmers is a very minor part of BNM'soverall activities. However, BNM through its smallholder credits hasprovided important support to agricultural extension programs ("grandesoperations"). It has made up to 47,000 individual loans (1972) with anaverage loan size of some FMG 7,000 (about US$32). Much of the credit hasreached the farmer in kind (seeds, fertilizer, etc.) and has been repaidat harvest time. Because of the control exercised by the agriculturalextension service, the rate of repayment has been high (90 percent).

39. BNM has for a number of years been operating various group creditarrangements (SCAM, AIR and PCA Globale). In view of the emphasis givento the development of the fokonolona, this type of lending is now receiving

1/ Agriculture classique.2/ Petits credits agricoles.

ANNEX IPage 13

much greater attention. The Bank has nine provincial branches and an ad-ditional six at the level of the prefecture. At the level of the sub-pre-fecture it now has 50 permanent or occasional offices (and one mobile bankin the Lac Alaotra area). It is currently operating with 2,000 fokonolona(or about 20 percent of the total). In 1974 BNM sought no more than themoral backing of the fokonolona for its smallholder credit program, but isnow moving in the direction of establishing collective accounts with thefokonolona. Savings accounts 1/ were initiated for the vatoeka in July1975.

40. The old SCAMs 2/ which existed in the Lac Alaotra area are ap-parently to be retained, though now under the supervision of the fokono-lona. During 1975 BNM operated a transitional system, receiving collec-tive demands for credit from the fokonolona and, on the basis of lists ofinterested parties prepared by them, in effect making individual loans.However, it is expected that within two to three years fokonolona willbecome the final recipients of BNM credit and that distribution and col-lection within the fokontany will be the responsibility of the vatoeka.With the growth of the collective credit system through the fokonolona,demand for credit may escalate, a demand which BNM may have difficultyin meeting.

Research

41. The National Center for Applied Research on Rural Development(CENRADERU) was created in June 1974. It is a public institution enjoyingfinancial autonomy. Its 1975 budget was FMG 1.2 billion, about 30 percentcoming from the sale of vaccines and other products manufactured in itslaboratories and from contractual arrangements for analyses and studies.

42. CENRADERU has taken over all the physical facilities of the re-search centers previously operated by the French, and the numerous Frenchresearch personnel who used to be employed have mostly left Madagascar. Itis organized into four departments: Agronomy, Forestry, Animal Husbandry,Technology (agricultural engineering, hydrology, conservation, processing,etc.). Most of its staff are the former employees of the previous researchorganizations. Although employing some 1,000 persons, the Center has only40 professionals with training at or above the university level. Of these,a quarter have had advanced training in specialized subjects.

43. The former system of research, organized and directed from Paris,by numerous independent agencies 3/ with limited Malagasy participation inthe design and execution of the research programs had serious disadvantages.The new organization should be better placed to develop a local researchcapability focused on practical problems requiring urgent solution. But

1/ Carnet de depots.2/ Societes de credit agricole mutuelle.3/ IRAM, IRAT, IFAC, IFCC, IEMVT, ORSTOM, etc.

ANNEX IPage 14

CENRADERU has not yet resolved the critical problems of staffing and ofthe coordination and integration of its activities with the developmentprograms of the Ministry. In the short run at least, the quantity (andquality) of research which the Center is capable of carrying out is lim-ited. It has yet to solve the organizational problems inherent in havingresearch separate from the MDRRA. Apparently, to date the Ministry hasnot commissioned, or financed, any new research activity. The detachmentof research from the day to day problems of the Ministry may lead to alack of appreciation as to which problems need to be researched. Thisintimate connection between operations and problem solving research is akey element in designing successful research systems for agricultural de-velopment.

44. Research should be the leading edge in agricultural development.Considerable experience is available worldwide on designing research sys-tems in support of development. Madagascar appears to have been largelyisolated from that experience and could certainly benefit from closer con-tacts with external research organizations.

45. As yet the Center has limited capacity for economic studies.A Permanent Bureau of Agricultural Economics is attached to the Director'sOffice, but has only two university graduates and does not appear to be en-gaged in any research except in conjunction with technical studies (e.g.optimum levels of fertilizer application). CENRADERU should have a majoreconomic research component if it is to be able to provide effective sup-port for rural development programs.

Education and Training

46. Training of middle level professionals is the responsibilityof the Agricultural Training Service 1/. Three levels are distinguished:moniteurs, agents techniques, adjoints techniques. Moniteurs (with onlyprimary school training) have traditionally been trained on the job,whilstagents techniques received two years of training (one year of basic agri-cultural education plus one year in specialized training in agriculturalengineering, animal husbandry, agronomy or forestry) resulting in a diploma(BTA) 2/. Adjoints techniques were given four years of training aftercompleting their primary school certificate (BEPC): two years of generalstudies followed by two years of specialized training.

47. In 1972 a reform of this system was initiated and all the trainingestablishments for agents and adjoints techniques were transformed intoAgricultural High Schools (Lycees agricoles). The curriculum was changed

1/ Service de l'Enseignement et Formation Agricole.

2/ Brevet de technicien agricole.

ANNEX IPage 15

in order to accommodate a perceived need for training of people to workin the private sector (on own account as farmers/migrants, or for privateorganizations) as well as for the Ministry. Admission requirements wereraised to require the BEPC for all entrants and admission was based oncompetitive examinations. The program was split into two cycles:

- 1st cycle: 2 years of non-specialized trainingdirected at training practical farmers resultingin the award of the BTA diploma;

- 2nd cycle: 2 years of specialized training foradjoint technique.

These reforms have taken into account on the one hand, the saturation of theMinistry of Rural Development with middle level cadres , at least with respectto available budgetary resources, and on the other, past dissatisfaction withthe field performance of such cadres. The number of these cadres completingtheir training has been as follows:

Agents techniques Adjoints techniques

1972 540 801973 120 951974 0 851975 175 75

Of those completing the first cycle BTA in 1975, some 60 are expected to goon to the second cycle, forty will be recruited as agents techniques, andthe remaining 75 will participate in settlement programs after their nationalservice. There are eight lycees, two in Tananarive and Fianarantsoa and onein each of the other provinces. The second cycle is offered only in Tananariveand Fianarantsoa.

48. In addition to these programs some 30 Centers of ProfessionalAgricultural Training have been created throughout the country, of whichonly five are currently operating. Their purpose is to give technicaltraining to farmers' sons and potential migrants. In 1975 about 250 youthswere enrolled in a one-year program, of which about two thirds are expectedto be migrants and the remainder will go back to the "family farm".

49. University level training in agriculture is carried out by theFaculty of Agriculture at the University. It is therefore under the controlof the Ministry of Education. The program lasts four years and has beengraduating about 30 to 40 students a year. First year enrollment in 1975was increased to 85. The curriculum is undergoing revision to make it morerelevant. All post-graduate training is done abroad.

50. There are very few technicians in the Ministry with advancedspecialized training. With the recent departure of many foreign technicalassistance personnel, the need for high quality training in specializedbranches of agriculture is more acute than ever.

ANNEX IPage 16

51. The MDRRA does not have any manpower planning study projectingfuture requirements for the various cadres. Such a study is urgently needed.The potential demand for extension staff for the fokonolona (each is to havea Support Committee of which one key member is a representative of the MDRRA),for extension programs (under way or planned), as well as for higher levelmanpower, should be evaluated and training programs geared to identifiedneeds.

D. PROSPECTS FOR THE PRINCIPAL CROPS AND LIVESTOCK

Rice

52. The success of efforts to expand rice production to meet growingconsumption requirements is critical for Madagascar's economic development.If production is not expanded, the cost of imports will impose an intolerablestrain on the balance of payments.

53. Rice is largely produced for home consumption - less than 15 per-cent of the crop enters commercial channels. Since producers satisfy theirown consumption needs first, marketed surplus absorbs the fluctuations inoutput which, although small in relation to total output, result in greatlymagnified fluctuations in the marketed portion of the crop. In recent yearsmarketed surplus has ranged from 180 to 310 thousand tons. Thus on the onehand the problem is to increase rice production and on the other to extracta larger surplus to meet the rapidly growing urban demand.

54. Madagascar has historically been self-sufficient in rice. However,a poor harvest in 1965 necessitated an unprecedented level of rice imports 1/.This led to an intensification of efforts to develop rice production whichhad already begun during the colonial period. Between 1964 and 1972, FMG30 billion were spent on increasing rice production. Despite these effortsrice production grew by only 10.1% or a little more than 1% per year, a rateof increase insufficient to keep pace with population growth.

55. Why did these efforts not have a greater impact? There is nosingle answer but the following are some of the more important reasons:

(i) investments in irrigation infrastructure - existingand new - exceeded the capacity available locally toeffectively utilize the water for irrigation.

(ii) lack of production credit and price incentives.

(iii) plethora of agencies, programs and operations.

(iv) the difficult natural conditions (low temperaturesand lack of sun in the High Plateau, erosion and

1/ 67,000 tons of net imports.

ANNEX IPage 17

CHART 1-2: MADAGASCAR - PRODUCTION OF PADDYAND IMPORT OF RICE, 1965-75 Import,

MarketProduction Production(million thousandtons) tons

2 Total 400Production

300

1/ ~ 200

100

\../ Net Imports~~- ~of rice

0 ~~~~~~~~~~~~~~~~~~~~~~00~~~~~~~~~~~~~~~~~~#.02 \>> t %

*41#.

I I I I 1I I I I

1966 1968 1970 1972 -1974

Notes: Scales for Production and Urban Consumplign not the sameUrban consumption - marketed surplus plus net imports World Bank- 16590

ANNEX IPage 18

sedimentation of irrigation works, transport dif-ficulties;

(v) limited technological innovations available forincreasing output (new seeds, agronomic practices,etc.) linked with the limited availability and useof fertilizers and agricultural chemicals (diseasecontrol) and the limited experience of extensionpersonnel;

(vi) archaic marketing (storage, milling and handling)systems, resulting in high losses;

(vii) preponderance of irrigation by small-scale watersystems which do not permit adequate water control;

(viii) concentration of extension efforts in the High Plateauwhere yields are already relatively high and furtherproductivity gains may be more difficult to achieve.

56. Whatever the reasons, it is clear that solutions to Madagascar'srice problems are not simple. Madagascar has no "Mekong Delta", but ratheris more like Java (on the High Plateau at least) with small terraced ricefields. There are sizeable areas yet to be developed, especially on theWest coast, but these require heavy investment in infrastructure; eventhey are relatively small (ranging from 1 to 20,000 hectares) in comparisonto major irrigation projects elsewhere in the world.

57. In 1974 the Ministry of Rural Development launched a new "Rattra-page padi" program 1/. This program has replaced the old GOPR program 2/which is scheduled to come to an end in December 1975. The new programhas absorbed some of the functions of the GOPR but has taken several newdirections:

(i) greater emphasis on increasing the area under ricecultivation, including the opening up of new ir-rigated areas and the development of upland ricecultivation (tanety);

(ii) more research on improved varieties;

(iii) an expanded use of fertilizer;

(iv) an effort to reduce losses in milling and storage.

1/ "Rice catch-up program".

2/ Groupement des Operations de Productivite Rizicole.

ANNEX IPage 19

58. During 1974, 18,422 ha of new land were prepared for irr-igation butonly 3,488 ha were put into cultivation; the target was 10,015 ha. Rattrapagepadi has been handicapped by shortage of funds, lack of equipment and trans-port, poor distribution of seeds, scarcity of fertilizer and pesticides, andmultiple problems of control and organization. Already within just two yearsof its existence FMG 5 billion have been committed out of a FMG 7 billionfive-year budget.

59. The magnitude of the problem can best be demostrated by the follow-ing analysis of projected demand. Consumption is growing annually at the rateof 3 percent, equivalent to about 60,000 tons of paddy. With rising incomesthis rate would increase, the income elasticity of demand being 0.14. It canbe conservatively estimated that by 1990 total consumption will amount to atleast 3 million tons of paddy, or more than 50 percent above the record cropof 1974 (1,963 million tons). If recent trends in the growth of productioncontinue, the annual deficit would be of the order of 500,000 tons by 1990,a potential deficit much greater than the food aid received by the Sahelcountries in 1975.

60. If average yields remain at 2 tons per ha, 500,000 ha of new paddyfields would have to be developed to meet the demand in 1990. However,the Government estimates 160,000 ha to be the upper ceiling on increasesin acreage from new irrigation schemes ("grands perimetres"). If these andexisting rice paddies are to provide the necessary growth in production,yields have to increase. This in turn implies greatly increased use offertilizer. In 1972, before reductions on fertilizer imports were imposed,only 1,543 tons of nitrogen fertilizer were used, or less than 1.5 kg perhectare. The implications for government revenue and foreign exchange of anyprogram involving the increased use of subsidized fertilizer imports willneed to be carefully evaluated. More generally, given the seriousness of therice situation and the failure of rice programs to date, Madagascar couldwell consider seeking the assistance of the world's most capable rice plantbreeders, researchers and extension specialists.

61. Madagascar has traditionally exported about 12,000 tons per annumof high quality rice to Europe. This rice fetches a premium price; in 1974de luxe rice sold (f.o.b.) at a price 80 percent above standard imported rice(c.i.f.). It would be advantageous not only to continue to export this ricebut also to expand production.

Coffee

62. Recent efforts to increase coffee production have been successful.Production has risen from an average of 69,000 tons per annum of green coffeein the period 1964-69 to 87,400 tons in 1974. Operation Coffee was started in1966 in an attempt to rejuvenate the old and low yielding coffee plantations,to introduce new techniques and thereby to increase incomes from coffeeproduction and the export of coffee. Operation Coffee attempted to increasethe number of coffee growers, to rehabilitate existing coffee groves and tointroduce modern cultivation practices amongst smallholders. Since the scheme

ANNEX IPage 20

CHART 1-3: MADAGASCAR - COFFEE PRODUCTION AND EXPORTS,

ACTUAL AND PROJECTED, 1965-1990

Thousand tons

100

80 -Production Ir~~~~~~~~~~~~~~~~~~~*

60q * ~~~~~~~Exports

40 -

20

0 _

1965 1970 1975 1980 1985 1990

World Bank-16586

ANNEX IPage 21

attempted to reach some 289,000 producers (99 percent of coffee producers are

peasant farmers) with an average holding of only 0.76 ha each, this was anambitious program. The original targets for the project were: 1,220 ha per

year of new plantings and 1,220 ha per year of rehabilitated groves. A major

technical innovation has been the imtroduction of clonal coffee.

63. Between 1966 and 1973 FMG 5.7 billion were spent under the project,

45 percent of which was on the development of rural roads and infrastructure.The project has been successful in the creation of nurseries and the pro-

duction of cuttings. The principal problems encountered have been the reluc-

tance of peasant farmers to accept new methods, very limited availability of

credit (only FMG 5 million in 1973), limited use of fertilizers and continu-

ing problems of marketing and transport. By the end of 1974 9,000 hectares

of new plantations had been established and 3,665 hectares rehabilitated,20 percent of the coffee farmers had been reached.

64. These achievements should enable the current level of production

to be maintained, together with an improvement in quality. Yet, considering

that there are more than 150,000 hectares of coffee to be covered by the

project, more than two thirds of which were planted before 1940, the 274hectares rehabilitated and 1,570 hectares planted in 1974 are insignifi-

cant. The current project target is to plant 2,300 hectares each year.Given the existence of an ongoing extension program with a solid technical

base and the experience accumulated over nearly ten years, it is likely that

production will be steadily expanded, and may easily reach 100,000 tons perannum by 1990. (See Chart 1-3.)

Cloves

65. Clove production in Madagascar is concentrated on the east coast

in the province of Tamatave; 90 percent of all acreage is in the single

prefecture of Fenerive East. Areas planted have been expanding steadily

from 28,000 hectares in 1964 to 50,000 hectares in 1974. Although produc-

tion is highly variable - following a four-year cycle of one boom year

followed by three poor years - it has also been growing steadily (Chart 1-4),

and now averages some 8,000 tons per year. 1974 was a boom year with pro-duction reaching a record 17.8 thousand tons.

66. Clove production has suffered from insect attack (Andretra) which

reduces yields by 10 to 30 percent, destruction of trees by high winds (the

clove has a very superficial root system) and excessive cutting for oil

extraction. Yields are presently of the order of 175 to 200 kg/hectare, but

it is possible with improved seedlings, insect control and better plantmaintenance to obtain yields of 500 kg/hectare. For these reasons, a five-

year Clove Production Improvement Program was started in 1975. Costing FMG

one billion, the project involves planting 10 million new clove trees on

50,000 hectares, to raise yields to 300 kg/hectare and to raise clove pro-

duction to some 15,000 tons on average (and 2,400 tons of essential oils).

If this were achieved, and markets could be found at present prices, the for-

eign exchange earnings from cloves would amount to FMG 20 billion per year.

ANNEX IPage 22

CHART 1-4: MADAGASCAR - CLOVE PRODUCTION,EXPORTS AND PROJECTIONS,

1965-1 990

Thousandtons

Production15

1965 1970 1975 1980 1985 ] 990

World Bank- 16589

ANNEX IPage 23

In view of the recent producer price increases, the limited geographic spreadof clove growers (and, hence, ease of maintaining an extension program) andthe availability of the necessary technology, a production target of anaverage of 15,000 tons per year should easily be attainable.

67. World prices for cloves have quadrupled over the last ten years.Madagascar has well-established clients in Malaysia and Indonesia, as well

as in the USA and Europe. At the present time, world demand is strong andMadagascar has been partly successful in stabilizing its export earnings byregulation of exports out of stocks. Clove essence has also been of import-ance; these essential oils are extracted from the stem and leaf, and exportsof about 1,000 tons per year have been maintained. However, Indonesia ismaking efforts to increase domestic production which, if successful, mayreduce Madagascar's clove exports. Serious problems may well be encounteredin marketing the planned increase in production.

Vanilla

68. Vanilla competes closely with cloves and coffee for land on the eastcoast. It is estimated that there are 37,710 vanilla growers with an averageof 1,230 vanilla trees, of which 47 percent are in production. Annual produc-tion of dry vanilla is stable around 1,800 tons per year, but it has proveddifficult to market the whole crop (Chart 1-5). Ninety percent of Madagas-car's exports are placed on the US and European markets where there is severecompetition from synthetic substitutes; natural vanilla is nearly 40 timesmore expensive than artificial vanilla. The Vanilla Stabilization Fund keepsin close contact with dealers in these markets, It undertakes advertising andis seeking increased protection for natural vanilla. Also it is trying todevelop new markets in Japan, Australia and Canada. Stocks on hand at thepresent time equal 2,400 tons or about 2 years of exports. Unfortunately,quality seems to be on the decline. The Stabilization Fund is concerned withlimiting domestic production, rather than with long run efforts to expandoutput. Indeed, unless production is rigidly controlled, there is every signthat domestic output will continue to grow faster than export demand. Proj-ections of exports must be made on the assumption of a very slow growth inmarket demand. Even though the Plan target of 1,800 tons of production for1977 can certainly be realized, it is not anticipated that exports will reachthis level until 1990.

Pepper

69. Pepper is yet another commodity of minor importance in terms ofland area (8,000 hectares), but which contributes significantly to foreignexchange earnings. Exports are running at some 3,000 tons and in 1974 con-stituted about 2 percent of total commodity exports by value. Plant disease,which has been a problem, is under control and a modest expansion program isunder way in conjunction with Operation Coffee. Exports have fluctuated moreor less in conjunction with production but with some reduction in stocks inthe last three years. Market prospects are good and consequently exportsare projected to reach 5,000 tons by 1990 (Chart 1-6).

ANNEX IPage 24

CHART 1 -5: MADAGASCAR - PRODUCTION, EXPORTS, AND PROJECTIONS

FOR VANILLA, 1963 - 90

rn1900

1770 18001775 o

[ / 1720 2 1690 -- co

1400 1380 H0Sr ,921353 0-- 1400

1218 1215 - -

1050 *0 1160 t 1050 / .#1097 * .

_cvo 7 984 1000

961 .

~~J :~~~o *. ~~ 855

- * 628 O*72720

.628 666

f92 Production**amsuu -Exports

1965 1970 1975 1980 1985 199

World Bank - 1667t

ANNEX IPage 25

CHART 1-6: MADAGASCAR - PRODUCTION EXPORTS ANDPROJECTIONS FORPEPPER, 1965-1990

ThousandTons5- -

4- 1oX Exports /

/ ^ I s\//

- I

1-~~~~~~~~~~~~~~~~~~~0

3 -~ ~ ~

I II L I I i I L 4 I l I I I I1965 V970 1975 1980 1985 1990

World Bank- 16588

ANNEX IPage 26

Fats and Oils

70. Madagascar has become increasingly dependent on imports of fatsand oils, and priority is now being given to expanding oil seed production.A small palm oil project and a coconut project on the east coast should sooncome into full production and there are plans for further expansion. How-ever, the major effort being made is in south and west Madagascar where in-creased groundnut production is planned. Additional milling capacity hasbeen built in Tulear, producer prices have been increased, seed multiplica-tion has been expanded. Present groundnut production is about 40,000 tonsand the revised target is to double output by 1977. Most of this increaseis to come from an expansion in area planted from around 40,000 hectaresto 75,000 hectares.

71. At the present time marketing seems to be the major bottleneck.There have been instances of groundnuts rotting in certain villages owingto the lack of transport. SINPA was given responsibility for marketingin 1973, but recently the Army has taken over the transporting of ground-nuts from some outlying areas to the mills. Thus, although the productionpotential exists, the storage and transportation problems must be solved ifthe plan targets are to be reached.

72. The 1974-77 Development Plan lists the following targets foroil seed production:

(tons)

Groundnut oil 8,750Cottonseed oil 4,000Coconut oil 600Palm oil 4,200

73. Production of cottonseed, coconut and palm oil of these magnitudesis entirely feasible from existing production and from plantations cominginto production. With current consumption amounting to 15,000 tons, plannedoutput would allow imports (averaging 10,000 tons in the period 1971-74) tobe greatly reduced.

Sugar

74. Sugar production stagnated between 1970 and 1973, but increased byalmost 16% in 1974. The four existing estates are working more or less atfull capacity and no new investments have been made. With consumption grow-ing steadily (income elasticity is a high 0.74), new production capacitywill soon be needed if Madagascar is not to have recourse to imports. Asugar mill of minimum economical size would produce 20 - 25,000 tons ofsugar, equal to about eight years of growth of internal demand. Two suchprojects are needed during the next fifteen years to satisfy the growth ofdemand. Two new projects are being proposed for southern Madagascar; but

ANNEX IPage 27

these projects would be in areas not well-suited to cane production, use ex-

pensive irrigation water, and may not prove to be viable. It would be moreadvantageous to locate the new plantations in the existing zones of naturalproduction in the North and promote in the South crops more suited to theecological conditions.

Animal Feed

75. Madagascar has considerable potential for developing a domestic

feed industry. Oilseed cake (cotton, groundnut, castor, coconut) is abun-dant and together with cassava and maize could provide high quality animalfeed for a major expansion of pork, poultry and cattle fattening operations.

Maize production could be greatly expanded, but at the present time, asin the case of groundnuts, marketing problems are restraining output.

Cotton

76. Cotton has been promoted most successfully in the last decade.Production has increased fivefold to 34,000 tons in 1975. The crop ismainly grown under dryland conditions and exclusively on the west coast.Yields increased very satisfactorily from 1.6 tons per hectare in the period

1964-68 to 2.3 tons in 1973, but thereafter fell to 1.9 tons per hectarein 1975 owing to adverse climatic conditions and a decline in the use offertilizers and insecticides. 51 percent of production comes from privateexpatriate companies; smallholders produce 34 percent and state farms theremaining 15 percent. The cotton development program is entrusted to theFrench-owned company (CFDT) which has responsibility, under a ten yearagreement signed in 1966, for seed multiplication, marketing and ginningof all cotton. It also provides the overall supervision of extension andundertakes the importation of fertilizers and pesticides and the control ofdisease by aerial spraying, as well as the management of state farms. Itis engaged in a training program to replace the nine remaining expatriatespecialists. Three cotton mills and six gins are in operation and thereare plans to enlarge the gins in Tulear and Ambilobe. Madagascar is nearlyself-sufficient in cotton textiles. Exports of seed cotton virtually ceasedin 1974; instead, exports of cotton manufactures have grown very rapidly inrecent years and now account for some 2.5% of total export earnings. Poten-tial for further expanding production for export is excellent.

Tobacco

77. Tobacco is cultivated both by small farmers and large producers.Varieties grown include Maryland and Virginia tobaccos, burley and chewingtobacco. Production fell dramatically in 1974 owing to the sudden departureof four major producers. About 2,500 tons of the domestic production areconsumed on the internal market; the balance is exported, mainly to the EEC.The marketing of tobacco is handled entirely by OFMATA. Production in 1975is estimated at 4,000 tons. The Plan target of 10,000 tons is unlikely tobe achieved until the mid-1980s.

ANNEX IPage 28

Other Commodities

78. Madagascar produces a wide range of minor commodities (wine, pears,cherries, tung oil, medicinal plants, tea, cocoa, bananas, citrus, raffia -to mention but a few), none of which are likely to become major contributorsto total output or exports but which collectively could have a substantialimpact. Many of these commodities can be grown only under certain environ-mental conditions, and have small domestic markets and no traditional exportmarket. It would be worthwhile to concentrate promotion efforts on thosecommodities with a strong market demand.

Table 6: PROJECTIONS OF MAJOR EXPORTS 1980 AND 1990 (Tons)

% AnnualAverage Growth1970-74 1980 1990 1974-90

Coffee 58,000 81,500 100,000 2.9Cloves a/ 6,000 10,500 15,000 6.3Vanilla a/ 1,200 1,400 1,800 1.9Pepper a! 2,900 3,800 5,000 5.6Meat, fresh or frozen 7,700 4,000 6,500 -1.1Meat preparations 4,200 5,000 6,500 2.4Fish b/ 6,100 15,000 20,000 2.3

a/ These commodities are subject to large annual fluctuationsin output.

b/ Mainly shrimps.

Source: Mission estimates.

Livestock

79. Livestock represents a major national resource. Data on the num-ber and distribution of-cattle is poor, estimates of the national herd vary-ing from 8 to 11 million head. Figures for other livestock are even lessreliable; the official estimate is that there are about 0.65 million sheep,1.14 million goats and 0.61 million pigs. They are distributed widely overthree main zones: the West has about half the national cattle herd and isthe most important breeding area; the Middle-West and the Central Highlands,where a large part of the herd are work oxen, are important breeding andfattening zones; the South holds one third of the national herd but thedevelopment potential is limited by the arid climatic conditions.

80. The productivity of the cattle herds is low. According to offi-cial statistics about 0.9 million head of cattle are slaughtered annually,of which only some 0.35 million are marketed through commercial channels.

ANNEX IPage 29

CHART 1-7: MADAGASCAR - EXPORT OF BEEF ANDBEEF PRODUCTS, 1965-75

ThousandTons

Fresh and Frozen

8

6 ~~~~~~~~~ ~ ~~~~Preserved 0

meat -- -

2 Hides and Skins

0 I I I I I I I l ; I I I I I I I I I I I I I I I I1965 T970 1975 1980 1985 1990

World Bank-16587

ANNEX IPage 30

Virtually all beef production comes from the traditional sector, commer-duction has contributed to a marked fall in meat exports in 1973 and 1974.In contrast, between 1966 and 1972 the volume of meat exports almostdoubled. Exports of live cattle declined sharply from 20,000 head in1970 to 5,800 in 1973 and about 5,000 in 1974.

81. Madagascar is fortumate in that the major cattle scourges afflict-ing most African countries - rinderpest, foot and mouth disease, pleuropneu-monia and trypanosomiasis - are absent. The principal health hazards areanthrax, black leg and gastro-intestinal parasites among calves. There issome evidence that health problems have been growing in recent years whichmay have contributed to a slight decline in the size of the national herd.This has been reflected in a 46 percent decline in reported slaughteringsbetween 1970 and 1974; there has also been a decline in average carcassweight.

82. The average size of a traditional family herd is small - about15 head - with a marked variation in unit size. In many areas theft isa major problem and leads the farmer to paddock his herd at night. Tradi-tional husbandry practices result in a low calving rate (40 to 60 percent),high calf mortality (20 to 40 percent) and slow growth in weight (slaughtercattle are 4 to 10 years old). There are almost no investments made inanimal husbandry and although output is low, production costs are neg-ligible.

83. The potential for improving livestock production is very great.The carrying capacity of natural pasture under traditional management, forexample, in the Middle-West is about 10 hectares per animal unit. Withcontrolled burning and grazing, it has been demonstrated that the carryingcapacity could be raised to-3.5 hectares per animal unit. With the intro-duction of improved varieties of legumes the figure may be as low as onehectare per animal unit. Use of modern husbandry techniques would enablethe offtake rate to be raised considerably.

Table 7: CATTLE NUMBERS (1970-74)(thousands)

1970 1971 1972 1973 1974

Recorded slaughterings fordomestic consumption 301 258 235 179 164

Herd Size (AdministrativeReturns) 6,578 6,178 6,913 6,063 6,041

Herd Size (MinistryEstimate, revised) 9,212 n.a. n.a. 8,484 8,456

Herd Size (SEDES Estimate) 10,650 10,500 n.a. n.a. n.a.

Source: Ministry of Rural Development, 1976, and SEDES (Paris), 1973.

ANNEX IPage 31

E. AGRICULTURAL MARKETING AND PRICING

Export Crops

84. Agricultural prices and marketing are key elements of the Govern-ment's intervention in agriculture. Prices of exports commodities have beencontrolled by various Stabilization Funds 1/ for over ten years. TheseFunds have generally achieved their objective of stabilizing prices toproducers through the regulation of internal prices, using accrued surpluseswhen world prices fall below the producer price and regulating externalprices through changes in stocks. The latter has been important for vanillaand cloves since Madagascar has a major share of the world market for thesecommodities. The Funds may have been somewhat conservative in their internalprice setting, except possibly in the case of coffee.

85. As world commodity prices have risen, producer prices in Madagascarfor export crops have also been increased considerably. For coffee andvanilla, for which average export prices have been fairly stable, the dif-ference between the producer price and the export price has been held rela-tively constant. Thus the margins on which the Funds operate have not beeninflated; rather the profit received by wholesalers have been squeezed. Inrecent years the largest increases in producer prices has been in respect ofcoffee and cloves. In the case of coffee, prices were raised from 135to 165 FMG/kg in 1974 and for cloves from 280 to 320 FMG/kg.

86. The pricing system in use by the Funds for export crops 2/ isstandardized. A "producer price" (a price on delivery to weigh stations,not a farm gate price) is established and this price is applied uniformlythroughout Madagascar. From this price a guaranteed (fixed) export priceis determined for each export port. These prices, which vary slightly fromone port to another to reflect differences in collection and transport costs,are those prices received by exporters. In the case of coffee, private ex-porters negotiate contracts abroad and then submit them for approval tothe Fund. For other commodities the Funds have become the principal or soleexporters. The difference between the actual f.o.b. export price and theguaranteed export price is paid into (or out of) the Fund.

87. The Sugar Stabilization Fund, created in 1969, has played a some-what different role. Its principal intervention has been in establishingproducer prices for small-scale producers delivering cane to the four estate-run factories, which produce about 85 to 90 percent of Madagascar's sugar.Prices for refined sugar ex factory for the domestic market have beenfixed at 36 FMG per kilo since 1952 and producer prices at about 2.3 FMG

1/ Caisses or Bureaux.

2/ The principal Caisses in operation are those for vanilla, cloves, cof-fee, pepper, groundnuts and sugar. The last two are more concernedwith domestic pricing and supplies.

ANNEX IPage 32

CHART 1-8: MADAGASCAR - PRODUCER AND EXPORT PRICES, 1966.75(FMG per kilo)

Coffee Vanilla

200 - 4000

Export Price'100 2000 -

Producer Price

Producer Prices 'dried vanilla'green vanilla

0 0 | I I X66 70 74 66 70 74

Clove. Pepper

800 - %, ~400

_00 - j300 Export Price / '

I Export Price _ 1 /

400 1200\

200 t 100_ / ~~~~Producer Price Producer Price

0 o I III II I I I

66 70 74 66 70 74

SIsal ~~~~~~~~~~Paddy

100 100

6080Export Price6080

60 _ so60 _Imported |

Ric

40 40 N40 0, t°Domestic

20 Producer Price 20 Paddy

86 70 7?4 66 70 74

World Bank- 16591

ANNEX IPage 33

per kilo of sugar cane. 1/ A tax of 0.5 FMG/kilo is levied on sugar fordomestic consumption to finance the Fund. The domestic retail price (ineffect since 1974) of 73 FMG/kilo (or 33c/US) is far below the world priceof sugar. This stabilization of the domestic price has been possible inthe absence of any new investment in field or processing capacity for manyyears. New sugar plantations will require substantial new investment andwill not be able to operate viably at the present artificially low inter-nal price. The Fund also represents Madagascar in international sugarnegotiations such as those relating to the American Sugar Act and the EEC-ACP agreements (and OCAM until 1974 when Madagascar withdrew for politicalreasons). The current quota in the EEC market is 10,000 tons. The annualsurplus of 30,000 to 40,000 tons is exported. From February to June 1975,at the time of exceptionally high world sugar prices, an "excess profits"tax of 60 FMG/kilo was imposed on exports of some 20,000 tons.

88. The Vanilla and Cloves Stabilization Funds have virtually sur-planted the private sector in acting as sole export marketing agents forthese commodities. Indeed, the general character of the Funds is under-going change as they assume more the role of a marketing board rather thantheir historic one of price stabilization funds. This is part of a largerpattern of increasing state involvement in the import-export trade, replacingprivate (and particularly foreign) interest. For other minor export commo-dities such as cocoa and lima beans, marketing is undertaken by SONACO.SONACO reportedly made large profits on the exports of lima beans in1975; apparently 80 percent of its trading surplus came from this onecommodity.

89. As a general comment on the present system, it may be saidthat when uniform producer prices are maintained the pattern of produc-tion tend to be distorted, transport costs increased and income redis-tributed away from growers with high comparative advantage. Even thoughfor vanilla and cloves the producing area is restricted and in the case ofcoffee the real producer price does reflect transportation costs, 2/ trans-port problems are nevertheless cited by the Funds as a major constraint tocrop expansion.

90. Although actual export prices may dip below the guaranteed ex-port price from time to time and have to be made up out of reserves ofthe Funds, in the last ten years the average price received for any yearhas always been greater than the guaranteed export price. In other words,the Funds have consistently made trading profits. These profits have in

1/ The 1974/75 price was increased to FMG 3.38 per kilo (11.5 percent sugarcontent), but may have to be reduced in 1976-77 unless the domesticretail price is increased.

2/ Provincial decrees fix the coffee price received by producers at up-country collection points taking into account the transport costs; thefixed "producer price" is really a wholesale price at weigh stations.

ANNEX IPage 34

part been reinvested in road construction, extension programs and researchand in particular to finance the holding of regulatory stocks (importantfor vanilla and cloves).

91. Possibly the most serious criticism of the present system isthat producer prices are largely paid without regard to quality differen-tials. Price incentives to produce higher grade products, which in turnwould receive higher prices on world markets, are absent or not enforced.Although quality differential pricing requires objective testing and grad-ing standards which involve additional cost and administrative complica-tions, experience elsewhere strongly indicates that it is both feasible andprofitable.

Domestic Marketing

92. SINPA 1/, created in November 1973, has a monopoly on the market-ing - collection, importing, processing and distribution - of rice, groundnutsand maize, and also participates in the marketing of beans, cocoa, cassava,coffee and cloves. It was formed by the fusion of the Rice Marketing andStablization Bureau, CEAMP 2/ and seventeen Syndicats de Communes. It hassince taken over the internal marketing functions of the Groundnut Bureau 3/.The decree establishing SINPA indicated that it would eventually absorb allthe existing Stabilization Funds. However, there is no sign that this willbe accomplished in the immediate future. In its first two years of opera-tions SINPA has encountered major management problems. Its poor performanceappears to have had a serious adverse effect on efforts to promote the produc-tion of rice and groundnuts.

93. SINPA has established uniform producer prices for rice, groundnutsand maize and retail prices in major distribution centers. In certain areasSINPA delegates its authority to other local agencies, such as the parastatalagricultural development corporations (e.g. SOMALAC, FIFABE, etc.) which areconsidered competent to carry out some of the marketing functions. SINPA hastaken over the operations of some 115 rice wholesalers and all of the ricemills. Transportation is paid for on a fixed charge basis. These chargeswere reportedly unattractive to private transporters who were reluctant touse their trucks at these rates, especially now that they have been excludedfrom other marketing operations. Consequently, the Army was called in to actas SINPA's agent in transporting rice and groundnuts particularly from someof the more remote areas. Although the Army is reimbursed for these servicesat fixed rates, it is likely that there is an element of hidden subsidy. 4/

1/ Societe d'Interet National des Produits Agricoles.2/ Centrale d'Equipement agricole et de modernisation du Paysannat.3/ Bureau de Commercialisation et de Stabilisation des Prix de l'Arachide.

As exports of groundnuts have been banned since late 1974, this Bureauis effectively inoperative.

4/ SINPA's operational and management problems are discussed in Annex III,paras 11-15.

ANNEX IPage 35

94. Similarly, rice mills are paid on the basis of a fixed charge.A number of rice mills have closed on account of insufficient volume ofbusiness and costs of operation higher than the margin allowed by SINPA.However, Madagascar's rice milling industry is largely out of date; there issubstantial excess capacity (50 percent or more), indicating that some ra-tionalization is desirable.

95. Given the critical importance of rice in the Malagasy diet andthe very low proportion of total production which is marketed - about 12 per-cent of the total crop in 1974 - some questions can be raised about SINPA'smarketing strategy. The marketed surplus of rice is largely consumed inthe cities, not all of which are linked by adequate roads to the surplusproducing areas. The cost of collection from some of the more remote areascan be very high. For example, it is likely that Fort Dauphin could be moreefficiently supplied by direct importation rather than by road from otherparts of the country. This kind of question could be answered by standardoperational research methodology (e.g., linear programming transportationmodels). Such analysis, which could easily be undertaken by consultantsspecializing in this work, would be of immense benefit in developing an"optimal" marketing strategy.

96. The restructuring of producer prices that has occurred since 1970has had some important results. During the period 1970-73, prices for exportand industrial crops increased more rapidly than the price of rice. However,the subsequent increase in the price of rice from FMG 14.2 in 1973 to FMG 30in 1974/75 has turned the terms of trade back in favor of rice production.Thus, although the 1970-71 changes in export crop prices may have stimulatedexport production, price policy since 1973-74 has been working in the oppositedirection.

Table 8: RELATIVE PRODUCER PRICES OF AGRICULTURAL COMMODITIES /a

1966 1970 1973 1975

Paddy 1.0 1.0 1.0 1.0Groundnuts 2.1 1.7 1.9 1.4Sisal 3.2 2.4 4.0 2.3Coffee 7.9 9.5 9.0 5.5Cotton 4.0 3.2 4.0 2.6Cloves 8.7 17.6 18.7 10.7Pepper 13.5 8.8 10.0 5.8Vanilla (green) 14.7 13.4 14.7 8.0Tobacco 17.0 8.7 7.9 4.7

/a Prices expressed relative to the producer price of paddy.Source: Mission estimates (see Annex V, Table 7.5).

97. The available data does not permit any substantive analysis ofproducer response to price increases; fluctuations owing to weather, politi-cal uncertainties and lack of information on production costs are some of

ANNEX IPage 36

the more important reasons. Nevertheless a knowledge of the price elasticityof supply of marketed surplus is of critical importance in judging the effec-tiveness of price policy.

98. Given the low level of use, or availability, of production increas-ing inputs, price policy may not be the most efficient means of generatingincreased output. Other methods such as subsidization of inputs, selectiveprice policy in favor of areas of high potential, increased efforts to supplymaterial inputs (seed, fertilizer, equipment, storage facilities), completingirrigation infrastructure and improving rural roads may all yield greaterreturns. These questions point to the need for more economic analysis insupport of policy making. Moreover all these elements are interrelated.Price policy alone unsupported by these other actions is unlikely to producedesired increases in production.

99. It is often said that the Malagasy peasant farmers are targetincome producers, irrational in their economic behavior, and that the sup-ply response to price increases may be "backward bending". As a consequenceit is frequently argued that agricultural production should be promoted bychanging the peasants' attitudes by direct government action in centrallydirected development schemes. Despite the creation of fokonolona, manyofficials do not seem to have much faith in the ability of the peasants tocontribute to national development without direction from above. There areno studies which have demonstrated the negative supply response to priceincentives; rather the available evidence indicates the contrary. To anoutside observer the traditional Malagasy farmer appears to possess a rela-tively high level of skill which suggests that there is considerable poten-tial to develop smallholder agriculture.

Retail Marketing and Prices

100. Retail prices for rice and maize are strictly controlled throughprice policy and through the operations of SINPA. Prices for other essentialcommodities including livestock are subject to control by provincial decreeand are "posted" in major markets. This pricing system can be characterizedas one designed to protect the urban cost of living. Yet, as a consequenceof fixed pricing, shortages arise leading to black market activities. In1975 there were localized shortages of meat, oil and even of rice. Given theexistence of a parallel market, published retail price data for Tananarive 1/(the only city for which monthly retail price data are collected) have to beinterpreted with some caution, since the posted prices do not necessarilyaccurately reflect underlying supply and demand situations. Increases in pro-ducer prices resulted in a 22 percent jump in the food price index in 1974, 2/but subsequently prices have remained unaltered or have increased onlyslightly.

1/ See Annex V, Table 6.3.

2/ Lower income households; see Annex V, Table 9.2.

ANNEX IPage 37

101. The power of the provinciai authorities to "fix" prices bydecree has had, in certain instances, some unfortunate consequences. Forexample, in 1974, following an attempt to hold down pork prices, manyproducers around Tananarive ceased pork production, setting off a "hogcycle". It is evident that the provincial administrations are not staffedto undertake the necessary technical evaluation of price control decisions.

102. The key commodity in the urban cost of living is rice. Althoughthe retail price was increased from 36 FMG/kilo in September 1973 to 65FMG/kilo in March 1974, in line with the increase in producer prices, thisretail price is considerably below import costs. In 1974 the average c.i.f.price of rice was 93 FMG/kilo. Consequently, at a time when Madagascar hadto import substantial quantities of rice, it has been necessary to subsidizerice imports. These consumer subsidies amounted to some FMG 2.8 billion in1974. 1/ Although world rice prices have eased somewhat during 1975, worldprices remained well above Madagascar's,internal prices and rice importscontinued to be subsidized.

103. For some years, to protect consumers, the Government has beenconcerned with holding down the price of meat in the urban areas. Threerelated policies have been pursued: (i) controls have been improved onretail meat prices, (ii) since 1973 quotas have been applied to exports ofmeat, meat products and live animals, and (iii) an attempt has been made tocontrol live cattle marketing. Retail prices, fixed by local authorities,have been increased only 15 percent since 1973, when they were set 40 per-cent below world market levels. The Government considers the margins be-tween prices paid to cattle producers and retail meat prices to be exces-sive. To reduce them, it is proposed that the private middle-men should bereplaced in the immediate future by parastatal organizations (OMBY, OVOMA,SINPA, etc.). In the long term the Government envisages that all cattlemarketing would be controlled by the fokonolona.

104. If serious dislocation in the marketing of cattle is to beavoided, reform of the present system needs to be devised after a thor-ough study of the existing arrangements. It is possible that producermeat prices are now so low as to discourage production. In any event,with the maintenance of artificially low prices, it is clear that thefarmers are subsidizing the urban consumers. Comparisons with otherdeveloping countries lead to the conclusion that marketing margins arenot excessive and there is no compelling reason to believe that parastatalintervention will lead to any reduction in retail prices. Given the in-experience of the parastatal organizations in this field, the contrarymight be expected.

1/ The actual sum lent to SINPA for rice imports by the Treasury for theyear ending September 30, 1974 and remaining outstanding was FMG 9.1billion; much of this remains outstanding.

ANNEX IPage 38

F. IN CONCLUSION

105. The land and the peasant farmers who work it are Madagascar'smost valuable resources, yet agriculture has been the slowest growing

sector. If development is to be accelerated ways must be found to makethe country self-sufficient in food, while at the same time rapidly

increasing the output of industrial crops both for export and local

processing. To make more effective use of available resources, a com-prehensive development plan for the sector is required which relatesprojects to targets and targets to objectives. For both the evaluation

of projects and the elaboration of policies the planners require greatlyimproved data.

106. Numerous projects have been undertaken but with limited success.A thorough reappraisal of past programs is now required to provide a

basis for devising new and more effective projects. The main problemsto be overcome appear to be: (i) poor rural roads; (ii) inefficientmarketing arrangements; (iii) an inadequate supply of farm equipment and

inputs; and (iv) a lack of credit facilities for small farmers. Ideallythese constraints would be tackled on a nationwide basis, in preferenceto the localized schemes so far attempted.

ANNEX II

MANUFACTURINGPAST PERFORMANCE AND FUTURE PROSPECTS

TABLE OF CONTENTS

Page No.

A. PAST PERFORMANCE ............................................... 1

B. PAST INVESTMENT IN MANUFACTURING ................................ 3

Basic Policies for Industrial Development .... ............. 5Investment Incentives ..................................... 6Profit Squeeze ............................................ 7Promotion of Public Sector Projects ....................... 8

C. IMPORT SUBSTITUTION AND MARKET SIZE ............................ 10

D. THE DEVELOPMENT OF SMALL AND MEDIUM-SCALE ENTERPRISES ANDCRAFT INDUSTRIES .......................................... 10

E. FUTURE PROSPECTS ............................................... 13

F. SMALL/MEDIUM-SCALE PROJECTS AND CRAFT INDUSTRIES .... ........... 15

G. SUMMARY ........................................................ 15

APPENDIX 1: SUMMARY OF INDUSTRIAL PROJECT PIPELINE

APPENDIX 2: INDUSTRIAL PROJECTS UNDER PREPARATION

ANNEX IIPage 1

MANUFACTURING

PAST PERFORMANCE AND FUTURE PROSPECTS

A. Past Performance

1. At independence in 1960 the manufacturing sector accounted for only5 percent of GDP. Since then the Government has actively promoted industrialdevelopment by providing generous incentives to investors 1/ and by creatingnew institutions, namely: an investment fund (Societe Nationale d'Investisse-ment - SNI) established in 1962, a development bank (Banque Nationale Malgachede Developpement - BNM) established in 1963 and an industrial development pro-motion bureau (Bureau de Developpement et de Promotion Industrielle - BDPI)established in 1966. SNI was merged with BNM in 1973. The Department ofIndustries in the Ministry of the Economy has mainly performed a regulatoryfunction.

2. Between 1966 and 1971 the value added of manufacturing increasedannually by 6 percent in real terms, or about one and a half times theaverage rate of growth of GDP. By 1971 the contribution of the manufacturingsector to GDP had reached 13 percent. During the following four years growthof value added in the manufacturing sector averaged just under 2 percent perannum in real terms, but fluctuated quite sharply from year to year. Thisslowdown in the rate of growth of manufacturing output is mainly explained bythe uncertainties created by the political events of 1972 when private invest-ment (in prices of 1970) fell by FMG 6 billion to FMG 21 billion. In 1973private investment declined further to FMG 20 billion, while public investmentincreased by about FMG 1.5 billion. Incomes generated in the agriculturalsector stagnated. The combined effect of these factors led to a decrease inmanufacturing output of about 2.5 percent in that year. In 1974 manufacturingoutput increased by 8 percent, stimulated by a record agricultural output.

3. Growth of manufacturing has been very largely based on the domesticmarket, sheltered by relatively high effective rates of protection. Exportsare limited mainly to the products of agro-industries and the petroleum re-finery. About 10 percent of the output of the cigarette and wood industriesis also exported.

4. The contribution of each manufacturing subsector to growth has beenvery uneven during the period 1970 to 1974. The following features may benoted:

(a) There was a decline in value added in the agro-industry,food and beverage subsector between 1970 and 1973, mostlythe result of lower agricultural output; this subsector re-gained some momentum in 1974 following a good agricultural

1/ Code d'Investissement (1961).

ANNEX IIPage 2

crop, but appears to have lost it again in 1975. In spiteof its poor growth performance in the past four years, itstill accounted for about 49 percent of total value added(in current prices) in the manufacturing sector in 1974 (ascompared to 46 percent in 1970).

(b) The decrease in output in the food subsector was fullyoffset by a marked increase in the textiles/clothing subsec-tor, where the annual rate of growth averaged 10.5 percentbetween 1970 and 1974. This sector accounted in 1974 for 25percent of total output in the manufacturing sector, ascompared to 23 percent in 1970.

(c) The highest rates of growth were recorded in the leather sub-sector, followed by paper, textiles, rubber and chemicals.

(d) During the same period, the output of the construction materialsand wood industries decreased sharply as a result of the collapseof the residential construction market, following the events of1972 and the consequent departure of a large number of foreigners.

(e) Stagnation in the tobacco subsector in 1974, after three yearsof substained growth, is explained by the loss of the Reunionand Comoro isiands' markets.

Table 1: INDUSTRIAL VALUE ADDED, 1970-74

(in constant 1970 prices)

Percentage Percentage Growth ratecontribution contribution per

Industry (1970) (1974) annum (%)

Food and beverages 39.5 31.6 -2.3Textiles 20.3 28.8 12.8Clothing 7.7 7.9 3.8Construction materials 7.7 4.4 -11.3Petroleum refining 5.0 4.8 2.4Chemicals 4.8 6.3 10.5Tobacco 3.9 4.4 6.2Printing 3.8 3.1 -1.8Paper 2.4 3.5 14.0Transport equipment 1.9 1.5 -3.2Wood 1.8 1.1 -11.2Leather 0.8 2.3 35.0Rubber 0.4 0.5 11.9

Total 100 100

Source: INSRE (see also Annex V, Table 8.4).

ANNEX IIPage 3

5. In 1974 there were about 400 manufacturing enterprises 1/ inMadagascar above the handicraft level. The 80 largest firms among them areestimated to account for 70-75 percent of the value added in the manufactur-ing sector. The vast majority of these are foreign-owned. Capacity utiliza-tion in the large-scale manufacturing sector 2/ was about 70 percent in 1971and 68 percent in 1972. No figures are available for 1973 but it is likelythat capacity utilization fell further in that year. In 1974 there was a 9 per-cent increase in manufacturing output in real terms, and capacity utilizationincreased again to an estimated 75 percent. Variations among subsectors andfirms, however, are quite large.

B. Past Investment in Manufacturing

6. Little information is available on past investment in the indus-trial sector. However, a number of indices point to a sharp drop in invest-ment in 1973 and 1974. For example, medium and long term credit outstandingto the manufacturing sectors fell from a peak of FMG 8.1 billion in 1972 toFMG 6.0 billion in 1974. Approvals for industrial projects by the DevelopmentBank, the only source of long term credit in the country, which averaged FMG1.3 billion in 1971/72, dropped to an average of FMG 0.8 billion in 1973/74.More indicative yet, disbursements by the Development Bank for industrialprojects in 1973/74 were only a third of the level they had reached in1971/72. Assuming that there is a strong correlation between credit out-standing and investments in each sector, it would appear that the drop ininvestments in the past three years was more marked in the manufacturingsector than in the other sectors of the economy. Another indicator of thedrop in manufacturing investments is given by the decrease in imports of(non-transport) equipment and machinery, which fell from FMG 10.8 billion in1971 to FMG 5.5 billion in 1974. 3/

7. These developments are not the result of a lack of investmentopportunities. A list of industrial projects presently under preparationis given in Appendices I and II. The majority of these projects were alreadyunder preparation in 1973 and 1974. However, their implementation has beendelayed by policy uncertainties, the non-automaticity of investment incen-tives, a squeeze on profits and manpower shortages in the public administra-tion charged with the promotion and analysis of industrial projects. Thesefactors are discussed below.

1/ Those enterprises employing more than five workers.

2/ Based on a sample of 40 large firms.

3/ Valued in 1970 prices; see Annex V, Table 3.19.

ANNEX IIPage 4

Table 2: LONG AND MEDIUM TERM CREDIT OUTSTANDING TOTHE MANUFACTURING SECTOR, 1971-74

(end of year: in billions of FMG)

1971 1972 1973 1974 1975

Medium Term Credit 1/

Processing of agriculturalproducts 1.48 1.49 1.37 1.18 0.95

Textile industries 1.60 1.80 1.23 1.06 0.65Other manufacturing industries 2.11 2.38 1.94 1.74 1.84

TOTAL 5.19 5.67 4.54 3.98 3.44

Long Term Credit 2/

Processing agriculturalproducts 0.14 0.10 0.09 0.11 0.10

Textile industries 0.83 0.84 0.85 0.85 0.83Other manufacturing industries 1.53 1.49 1.21 1.08 0.69

TOTAL 2.50 2.43 2.15 2.04 1.62

Total Medium and Long Term Creditto the Manufacturing Sector 7.69 8.10 6.69 6.02 5.06

Total Medium and Long Term Creditto All Sectors 12.27 13.79 12.70 12.03 10.44

1/ By commercial banks and the Development Bank2/ Long term credits are extended by the Development Bank only

Source: Central Bank

ANNEX IIPage 5

1. Basic Policies for Industrial Development

8 The Government has undertaken a fundamental revision of its basicpolitical options. The process was started in 1972 and was acceleratedwith the advent of the new Government in July 1975. The main objectives ofthe Goverrnment have been: (i) to put the economy under Malagasy control,and (ii) to enable the mass of the population to share more in the benefitsof growth. Decisions affecting the manufacturing sector include:

(a) The vital sectors of the economy have been reserved to theState, namely banking, insurance, foreign and internal trade,energy, mining, transportation and pharmaceutical and cinemaindustries. To these "re?erved" sectors were added in 1975the "key" sectors which the State will control by taking anequity participation (majority or minority, depending on thecase) in all large enterprises. 1/

(b) Madagascar left the Franc Zone in 1973 and since thenstrict exchange controls have been imposed on the transferabroad of profits and capital. In the face of balance ofpayments problems the Government has imposed tough importcontrol measures, which have given rise to irregularities inthe supply of intermediate goods and spare parts for machineryand caused some manufacturers serious difficulties.

(c) Private enterprise is expected to play an important roleoutside the sectors reserved to the State, but it will berequired to conform to the guidelines issued by the Statefor each sector; preference will be given to the developmentof the private Malagasy sector whenever foreign partners arenot strictly required by financial or technical considerations.

(d) Foreign companies are to be required to: (i) establish a legalresidence in Madagascar; (ii) incorporate nationals in theirmanagement teams; and (iii) allow the participation of localcapital in their share capital. In return, the Governmentwill not intervene in the management of these companies, willgrant them benefits under the Investment Code, and will autho-rize repatriation of profits abroad.

(e) In the context of income equalization, the general salarydifferentials will be reduced and basic minimum wagesprogressively raised.2/

9. These measures were generally well received by the Malagasy entre-preneurs. The measures had more severe implications for foreign investors,

1/ For a fuller discussion of the role of the public sector, see Annex III.

2/ See Annex V, Table 9.7.

ANNEX IIPage 6

and it was to be expected that they would have a marked effect on theirinvestment decisions. However, more than the measures in themselves, it wasprobably the vagueness concerning their detailed application which was res-ponsible for the slowdown in investments. This would explain why the slowdownaffected not only the investment decisions of foreigners but also of Malagasyentrepreneurs. Many expatriate businessmen have left Madagascar. Privateinvestors who remained adopted a "wait and see" attitude until the fullimplications of the decisions announced could be seen. From the point ofview of the entrepreneurs, precision was lacking mainly with regard tothe following questions:

- What are the key sectors in which the Government will takean equity participation and what enterprises will be affected?

- Which form will this participation or control take and on whatbasis will a compensation be calculated?

- In which sector will the State become an active promoter, andwill it be side by side with private activities or will theState ultimately establish a monopoly?

- What type of guidelines to the private sector does the Statehave in mind in the non-reserved, non-key sectors?

- How will the foreign exchange control system work, and on whatbasis will foreign exchange be allocated?

- By how much will salaries be increased and will the newpolicies affect the relationship between the unions and theentrepreneurs?

10. The "wait and see" attitude was reinforced by the concurrent stag-nation in agricultural production, thus adding to the general slowdown inthe economy. As a result, industrial capacity utilization was slowly de-clining in 1972 and 1973. A clear definition and delimitation of the rulesof the new system might help considerably to revive private investment.

2. Investment Incentives

The 1961 Investment Code provided generous incentives to the privatesector in the form of exemptions from import duties (for raw materials and/orequipment), reduction in, or exoneration from, profit taxes and other taxes, andthe granting of protection from imports by tariffs or quotas. Most of the in-vestments made since the introduction of the Investment Code benefited under

ANNEX IIPage 7

it in one form or another 1/. After ten years of experience with the Invest-ment Code, the Malagasy authorities concluded that the advantages which hadbeen granted had often little relationship with the economic benefitsthe country was deriving from these projects. A new Investment Code wastherefore introduced in September 1973. The main differences between the twoCodes are:

(a) Only those investments with a sufficient (not defined) eco-nomic rate of return and which contribute to the realizationof the Development Plan objectives - particularly with regardto employment creation, processing of national resources, pro-motion of the least developed regions of the country, increase inforeign exchange earnings, and participation of Malagasy nationalsin the share capital and management of enterprises - could benefitfrom the provisions of the new Code.

(b) Additional advantages were included in the new Code, namely:(i) an enterprise may be granted priority in the allocationof foreign exchange for its imports of raw materials andsemi-finished products and for the transfer abroad of divi-dends and funds resulting from the liquidation of the enter-prise; (ii) priority may be granted to an enterprise forgovernment contracts.

(c) Under the new Code, the agreements are not renewable.

(d) The new Code enables small and medium-scale enterprises to applyfor special advantages beyond those granted to large firms.

12. The new Investment Code is undoubtedly an improvement, yet aproblem remains which affects its efficiency as a promotion instrument.The Code is very general and does not commit the Government to granting aminimum set of advantages to enterprises which meet certain criteria. Onlyafter a project has been studied in all its aspects and a proposal has beensubmitted to the Government Investment Commission will a promoter be told thenature and extent of the advantages that he will obtain under the Code.This is therefore an added element of uncertainty which, although minor ascompared to the first mentioned above, appears to have played a role in slowingdown private investments.

3. Profit Squeeze

13. A survey of 41 large industrial enterprises in the public, semi-publicand private sectors undertaken by the Directorate of Planning each year between

1/ Out of 336 applications received between 1962 and 1975, 236 receivedbenefits under the Investment Code. About 20 applications were approvedeach year between 1962 and 1971. This figure dropped to an annual ave-rage of 8 between 1972 and 1975.

ANNEX IIPage 8

1971 and 1974 shows that their profitability (measured by the ratio of netprofit before taxes to total sales) decreased markedly. This is likelyto have been a major factor influencing the decision of entrepreneurs topostpone new investments.

14. Although the sample is not necessarily representative of theindustrial sector as a whole - the 41 enterprises are those which have ans-wered the questionnaire in the three years of reference - it neverthelessaccounts for more than one third of the value of production in the manufac-turing sector. The specific causes of the apparent profit squeeze werenot reported. However, several factors are known to have been at work.Production costs were increasing rapidly as a result of statutory increases inwage rates and the soaring prices of imported intermediate goods and equip-ment, but price controls prevented the increased costs from being passed onpromptly to consumers. Moreover, a depressed economy resulted in a slackeningof effective demand and hence a decrease in capacity utilization in 1972 and1973.

4. Promotion of Public Sector Projects

15. As could be expected, the political events of 1972 and 1975 resultedin delays in decisions relating to important projects in which the Stateintended to take a majority equity participation. Beyond this factor, how-ever, the preparation of public investment projects has been delayed by thelimited capacity within the Government of experienced staff trained to under-take project evaluation. The professional staff of the Directorate of Plan-ning and of the technical ministries are limited in number and overworked bythe day-to-day administrative matters. At the end of 1975, BDPI had onedivision with only four professionals responsible for the analysis of the 23strategic industrial projects. 1/ BDPI's budget allows for a staff of sevenprofessionals, but recruitment has proven difficult.

16. The economic rate of return has been estimated for only a few pro-jects and, even then, only for one of the possible alternatives with regardto the project's size, location, or the technology to be used. As there isno systematic quantification of the benefits and costs of the various alter-natives, staff recommendations remain qualitative. This gives rise to endlessdiscussions within the Government and to postponed decisions. This processmay only delay a project of a relatively simple nature, but a more complexproject may actually be blocked. This is particularly likely in the caseof a project involving the construction of new infrastructure with severalalternatives (between the construction of a port, a railroad, or a roadbetween various sites, themselves dependent on the realization of otherprojects, and so on). Even if a decision is to be made primarily on politicalgrounds, the Government normally wants to know what the cost of a politicaldecision is - for example, the cost of locating a plant in the South if itsrate of return is lower than at an alternative site - and great effort andtime is spent on arriving at a decision on non-quantified grounds, even thoughquantification is often possible.

1/ These projects are included in Appendix 2 which summarizes the statusof industrial projects under preparation as of November 1975.

ANNEX IIPage 9

Table 3: RATIO OF NET PROFIT (BEFORE TAX) TO SALES FOR41 LARGE ENTERPRISES

Sales in 1974 Profit indexAmount % of Total in 1974

Sector (FMG million) Sample (1971=100)

Agro-industry (excludingvegetable oil industry) 6,520 15.2 50

Vegetable oil industries 1,574 3.7 276

Food industries (includingbeverages) 4,039 9.4 45

Meat and fish 3,023 7.0 negative

Tobacco 1,268 2.9 84

Textiles 16,271 37.8 60

Leather 2,519 5.9 24

Wood and constructionmaterials 844 1.9 25

Paper 2,271 5.3 71

Chemicals 1,537 3.6 99

Metallurgical and mechanicalindustries 3,157 7.3 60

TOTAL 43,023 100.0 53


ANNEX IIPage 10

17. Another factor which has affected public sector investments isinsufficient coordination between government departments in the implementationof a project. Although the Directorate of Planning has been successful in

coordinating the preparation and implementation of many public projects, thistask has become increasingly difficult, given the limited number of its staffand the fact that the public sector is now undertaking the majority of large-scale projects in the country. Strengthening of the staff of the Directorateis essential.

C. Import Substitution and Market Size

18. The purchasing power of the majority of the population is verylimited. A large proportion of the rural population lives only on the fringesof the monetary economy. Also, the national market is quite fragmented as aresult of poor roads. Nevertheless, production for the local market explainsmost of the past industrial growth and continues to offer the best prospectsfor the near and medium term. This conclusion is based on the following:

(a) A large majority of the projects presently in the pipeline(see Appendix 2) either are projects to satisfy an increasein internal demand for products already produced in the

country or are import-substitution projects.

(b) BDPI has completed the initial studies for 20 small projectswhich it is currently proposing to prospective investors; theseprojects are all for import substitution.

19. However, in the longer term, import substitution possibilities andindustrial growth based on satisfying the year-to-year increase in internaldemand will become more and more limited, and industrial growth will dependincreasingly on establishing export-oriented enterprises. Table 4 summarizesthe evolution of the major categories of industrial imports during 1970-74which are gradually being replaced by local production.

20. The decline in these selected imports between 1971 and 1974 is dueto: (i) import substitution, (ii) the slackening in internal economicactivity, (iii) reduced import demand following the sharp increase in worldmarket prices, and (iv) import controls. As nothing is known about the priceand income elasticities of imports for these products, it is not possible toestimate the role played by each of these factors. It is likely that con-siderable import-substitution possibilities remain.

D. The Development of Small and Medium-Scale Enterprises andCraft Industries

21. Little information is available on small to medium-scale enterprisesand craft activities. However, it is likely that they have been less affectedby policy uncertainties or the profit squeeze, as they largely escape govern-ment control. The development of small enterprises is determined more by theavailability of promotional services, equity capital and technical assistance.

ANNEX IIPage 11

Table 4: SELECTED INDUSTRIAL IMPORTS, 1970-74(FMG million)

1970 1974 1974(1970 prices) (1970 prices) (1974 prices)

Processed food 947 536 708

Tobacco products 310 53 110

Cosmetics, soap 543 101 145

Paint 805 528 1,039

Textiles 1,385 574 945

Plastic products 907 784 1,340

Rubber products of which: 1,052 996 1,385

Tires (810) (790) (1,059)

Electrical equipment 2,965 2,725 4,035

Textile fibers 3,021 1,772 2,539

Cement 503 186 334

Fertilizers 598 210 405

Iron and steel 4,643 3,340 5,864

Source: INSRE and Mission estimates.

ANNEX IIPage 12

22. The promotion of small enterprises is the resonsibility of BDPI but-owing to staff shortages-BDPI's activities in this field remain limited. Bet-ween 1972 and 1975 BDPI helped implement 25 small to medium-scale projects.Applications for technical assistance from the BDPI increased from 25 in 1972to 100 in 1975, indicating a marked change in the attitude of private Malagasyinvestors towards the industrial sector as compared to the pre-1972 period.However, out of 100 applications in 1975, only 20 percent presented reasonableprospects of success, about the same ratio as in previous years. Promotionalactivities are also undertaken by SOMET, 1/ a private non-profit consultingcompany, set up in 1973 by a group of private Malagasy businessmen to studyinvestment opportunities in the industrial sector. So far SOMET has launchedtwo projects and is presently studying about 20 projects, including small sugarrefineries adapted to exploitations of 50-100 hectares, treatment plants forpyrethrum, soya and corn, and the production of absorbent fibers from tapiocaand glucose from cassava.

23. At the craft/artisanal level about 160,000 people are engaged in awide variety of trades. The government agency responsible for their promotion(CETA) 2/ touches less than 5 percent, mostly in Tananarive Province. Assis-tance is provided in procurement of supplies, quality control, marketing andpromotion. The product line is 80 percent raffia, the remainder being mainlywoodwork and semi-precious stones. CETA employs some 500 instructors who haveorganized the craftsmen on a cooperative basis. CETA has succeeded in estab-lishing higher standards of craftsmanship, greater standardization and moretimely delivery, all of which have facilitated marketing.

24. Another institution which has been active in promoting Malagasybusiness enterprises is the ILO-assisted National Institute for BusinessTraining and Promotion (INPF). 3/ For the larger firms INPF has helpeddevelop in-house training schemes, and has organized executive and middlelevel management training courses. For small and medium-sized businesses INPFhas focussed on the training of the owner-manager in basic business techniques,combined with follow-up consultancy in the field. INPF has also providedassistance in launching new small-scale ventures. During 1975 INPF had some40 Malagasy citizens under training as consultants and instructors.

25. The promotion of crafts and small to medium-scale businesses hassuffered in the past from the lack of an overall policy. A successful na-tional program would require the coordination of training, consultancy, mar-keting services and credit. BNM, for example, has a line of credit for thefinancing of small-scale enterprises, but the program has encountered anexceptional incidence of bad debts owing to the lack of field supervision andextension advice. The converse was true of a promising scheme launchedin the late sixties, in which a mobile workshop was used to train about1,000 craftsmen at the village level in the Tananarive-Fianarantsoa area.

1/ Societe Malgache d'Etudes, d'Organisation et de Gestion.2/ Centre Economique et Technique de l'Artisanat.3/ Institut National de Promotion-Formation.

ANNEX IIPage 13

Certificates were issued to facilitate access to financing but, in the ab-sence of a suitable credit agency, the trainees soon reverted to subsistenceagriculture.

26. Attempts made to train craftsmen in technical training institu-tions 1/ have not often led to self-employment, largely because the trainingtakes place in urban areas and the trainees prefer to seek salaried jobs.An alternative would be to focus on shorter, more practically oriented basictraining followed by upgrading on-the-job, on lines similar to the mobileworkshop scheme mentioned above. The problem of bad debts might be largelysolved within the context of the fokonolona system if loans were communallyguaranteed. The provision of equipment on a hire-purchase basis is an alter-native approach which has been successfully adopted in some other less dev-eloped countries.

E. Future Prospects

27. The Government is well aware of the factors which have affected theindustrial sector in the past three years. Measures have already been takenand others are being actively studied to remove some of the major obstacles.Among these measures are the following:

(i) Participation of the State: Decisions which have been made so farregarding the participation of the State in the industrial sector are pre-sented in Annex III. It appears that the major mode of intervention of theState will be through state holding companies created in each subsector. TheGovernment is presently discussing with major industrial enterprises the wayin which the new structure will function.

(ii) Role of the foreign sector: The Government recognizes the need forforeign capital and technology and envisages joint partnership with foreigninterests. The Government has sought, by delimiting the extent and mode ofits intervention in the industrial sector, to clarify the role of the privatesector under the new arrangements. Nevertheless, declarations alone cannotcompletely reassure either party, and only time and experience may eliminatethe uncertainties.

(iii) Investment Code: The Government is presently redrafting the Invest-ment Code to make its application more automatic. The intention is to defineminimum benefits which could be obtained automatically by any investor meetinga predetermined set of conditions with regard to employment, use of local re-sources, foreign exchange earnings, and the like. This would offer the follow-ing advantages:

(a) the Investment Code would become a more effective tool in stimulat-ing investments by removing a major uncertainty from the rate ofreturn calculation of the potential investor;

1/ Colleges professionnels et techniques.

ANNEX IIPage 14

(b) suspicions of unfairness in the application of the InvestmentCode would be largely avoided;

(c) the administrative burden would be considerbly reduced.

Such a revision of the Code, therefore, should lead to a faster recovery inindustrial investment.

(iv) Profit Squeeze: The Government is aware that the profit squeeze,which is largely the result of a much tougher application of the price controllegislation since 1972 in an attempt to limit inflationary pressures, hasdiscouraged investment. A proposal is under consideration for a revision inthe present price fixing system to take fuller and prompter account of theeffect of cost increases on the profitability of manufacturing enterprises.However, the issue of price controls is a difficult one and cannot be expectedto be solved soon. Some enterprises having made monopolistic profits in thepast, the Government is understandably reluctant to make quick decisions andwants to study each case on an ad hoc basis. The process will necessarily beslow.

(v) Public Investment Projects: To increase the capacity of the Govern-ment to prepare and appraise projects, the following measures are envisaged:

(a) Creation of a public consulting firm to fill the gap betweenthe projects' identification stage, undertaken by the techni-cal ministries, and the construction stage; it is anticipatedthat this firm would hire up to 50 professionals in its firstphase of operation.

(b) At the level of the Directorate of Planning, the identification,programming, coordination and evaluation functions are to besignificantly reinforced by the hiring of four consultants(an industrial economist, an engineer specializing in agro-industries, a financial analyst and a legal adviser), undera UNDP-financed project due to start operating in the firsthalf of 1976.

(c) Reinforcement of the Large Projects Division of BDPI bydoubling its staff; this Division could be merged with thepublic consulting firm referred to under (a) above.

(d) The creation of facilities for training or retraining managersin modern management techniques (See Annex III).

(e) The Government intends to attract Malagasy nationals presentlyworking abroad in the industrial/management field (estimated atabout 1,000) to work in Madagascar by offering them competitivesalaries.

ANNEX IIPage 15

Small/Medium-Scale Projects and Craft Industries

28. The Government has formulated a bold proposal for the developmentof small and medium-scale enterprises and craft industries, the major elementsof which are the following:

(a) the creation of regional centers to promote craft industries;this effectively implies an expansion and a decentralization ofCETA's activities;

(b) the creation of regional centers to promote small and medium-scale ventures, with financing to be provided by BNM and thecommercial banks;

(c) the assignment of the public consulting firm, mentioned above,to small and medium-scale private projects as well as to publicprojects;

(d) the reinforcement of the Small/Medium-Scale Projects Division ofBDPI whose staff is planned to double in 1976; this would per-mit BDPI to study and help implement 10 projects per annum inthe coming years.

The success of the proposed regional centers will depend on their abilityto offer a coordinated package of assistance, covering training, manage-ment advice, procurement, marketing and credit.

Summary

29. The Government has already taken a number of measures and is study-ing others directly dealing with the major causes of the slowdown in invest-ments in 1972-75 and the long-run constraints to industrial development inMadagascar. Within the overall political context, the proposals are imagina-tive and are based on a clear understanding of business realities. There aresigns that the decline in industrial investments has been arrested and thatthere will be a gradual recovery. Nevertheless, there are still a number ofuncertainties which will continue to have a depressive effect on investmentsin the near term until the full implications of public policy become clearthrough actual decisions.

30. The present government objective is for industrial investments toreach 5 percent of GDP by 1978 or about FMG 19 billion per annum (in 1976prices). Realization of this objective will depend on the removal of theconstraints to industrial developments discussed above. The present indus-trial project pipeline (summarized in Appendices 1 and 2) indicates thatprojects involving an investment of FMG 12 billion could be presented forfinancing in 1976-77 (i.e., FMG 9.5 billion per annum). This list is notexhaustive and other projects may be undertaken. However, it is not possible

ANNEX IIPage 16

to estimate at this stage how much these other projects will amount to. In

the longer run, the level of investments in specific years would be substan-

tially influenced by the realization of one or several large projects (ferro-

chrome, paper pulp, fertilizer, cement, etc.) which are planned. In preparingaggregate projections for the Malagasy economy, the Mission assumed that over

the next five years value added in the industrial sector will grow by anaverage of 4-5 percent per annum, and thereafter by 6 percent per annum. This

is a conservative estimate which should easily be achieved under conditions ofpolitical stability.

SUMMARY OF INDUSTRIAL PROJECT PIPELINE

Projects Expected to be Submitted to Financing Sources in 1976-77

Total Investment Costs1/ /

Large-Size Projects Medium-Size Projects All ProjectsPublic Private Total Public Private Total Public Private Total

A. Food and agro-industries 2,900 1,326 4,226 1,220 230 1,450 4,120 1,556 5,676

B. Chemical industries - - - 120 180 300 120 180 300

C. Construction materials - - - 85 560 645 85 560 645

D. Mechanical & electrical industries - - - 290 120 410 290 120 410

E. Mining & mineral products 2,800 - 2,800 - 50 50 2,800 50 2,850

F. Other industries 6,775 _ 6,775 _ 930 930 6,775 930 6,775

.Small projects1 - - - - - - - 1,200 1,200

T 0 T A L 12,475 1,326 13,801 1,715 2,070 3,785 14,190 4,596 18.786

jj Large-size projects: FMG 500 million and above.Medium-size projects: FMG 50 million to FMG 500 million,Small-size projects: Below FMG 50 million.

SOURCE: Ministry of Planning, BNM, BDPI, SOMET. I

x

APPEDIX 2

Page 1

INDDsTRIAL P18CTS gNDeRR PEPARATION

etoen-t ofCWeie Fint. /IE-n D.-onts impleemtatinn

Prolet Total Cooxt ieo mr Rte of Return Ailabte 1975 1976 1977 1978 1979 1980 1981 19S2 Next Steps Probli

(INC million

A. FOOD AND ACRO-IlND5TRIlES

1. 1976-77 PFojects

Vegetable oil refinery 200 Eiteosino Euilerie tRR207 opportunity x Deiisi Eogi ee.i g study

Tanoangivo Centrals de stody by a r-ssenttionT-oaceri-e ONIW _ eFgni.rlsg

(52% public) - Ceas.-rctio-

Treatment plant for 260 utc-enino Euilerie ERR-20l Opporotmity s D-cision Final deiciion by

grosodnut & cotton seeds Ceotrnl do study by Pt.et. sttioo for fi=acciog Gov-r eat

(Najunga) T -nanariv- CFDT ehgicering(52% ptblic) osstcu tiot

CTokies 460 i pebio 1000811 ERR,- 15 O tppusity U ci tetiag Updating of opportunityT..naro(publc study by ±Deoisen & resent- An fn finanog study

seterptiss) UNIDO & Esgi-e=ri

Sugar refinery 2,900 Cretis Peples , Srgar n-ae teat et up public t nt-

Republic Plantatin poise to r prjetof Chtes Cone ouctios or sagen cotract

Public

17021 beverage Indodtry 1.326 ixtennion lIM SAR o.abut l .ntrutmon Approved by BNH board~ananaoioo prefioblo aoubject to findingfinancig

SN8U1 (Incises liNerta1le de 300 Ecen.o i 0N5U Feasibility n Pests -i on to ftn Final denisin byH,jtl-cts dn Tmite) -(pubIc oettcco C-vroet

Treatonor of oil-ords by noerpr)

nolvent

Clover extroct 50 Creation Ictereetod n Study under- P easibility -rgi.n..rig Completion of tea..bilitypoeoctial tony pt-eearatico o -f ny cc study. Fin-l decision

pro t-r by pro-

(througbh BDF)

Vanili:n e-tract 50 Creation Interosted n.s. Stody under- Prntbilit3 sogi.net.lg Corpl-tion of feasibility

prototeri vy a PF sont - tin it Litn nc ng study. Final dstietnn

(rter E- by prnt-r

Iefrigoostcd eor-ge 60 Creation In-erosted on. Study under- Feaibtility etginn-risg Completion of feasibility

p-retnil y n Pesestaon to finano 08 tudy. Final decision

Poath by poter

Leathbe proce-niog 70 C-rsaton ctetnated na Pretetibility Feibilit, sgi-rtcg hCypltonof feaibility

tisicar ~~~~~~~~~pctrtisl a Pes -iaxo tn tino g tdy. Final denision

pr-t-r by pornoer

Total 1976-77 P-oJocts 5,676

2. Other Projects

Cahbeunoti 100 Creation YES na Pr-feasibility 7e-illty & egi-rer-ig Completion of feasibilitya Pre-entation to fEntnin; study

Loather ponteaslng 350 Creation Iptoeated na Prelimisary OsloseTu1-oac .o.....ratsa potntil etudie-

enioc, uY., n 1.500 Cr-ation NO na Preliinr Ukn.n- Prefesitbility by Jlly 1976

plantation and tret- etudl-

most plunt

Panpr- pp 42,000 Creation ac t Prelimixany Uknboe - Detailed calculatin ofS-ge Parsons- studie rtCe of retur

liitlsnoret ~~~~~~~~~~~~~~~~~~~- Tafrestruoture studies

1800 km of trmekb needed- ProJect depends O- teal-

ir ticr of Rngee hydro-eleotoin prnJect

Paper pulp 24,000 Cre-tion NO n.a Preliminary nloR - prjnoet unlikbly to be

Ma.PtniaPt,r!o st.dlee uderths at the s*

time an Mangos P.proPulp prn-ec

B. CHEKICAL INDUSTlIES

I' 9~~~I1. 1976-77 Projectsl

Prospbate of Majunga 120 Creation Public no. Opportesity Oeol nl surney Geological sry

enterprise stody = De-is-n & p-eseta-Aio tn fisancg Detailed oats nf retur- Pigisn=enig naleniatiom

Cseat-uction

P.atieido-T.ana.riv- INS Creation POCAD Preliminary Feasibility = DLaia on PDgine. rig study by

N/C rtio s tudy z Srnetatin to fin.i PDCHKf tfconsultants-stismted Pagla-rRg

t 3 - Cone roctius

Total 1976-77 Prjects 300

I- Icojeotr eponted to be pr-eneted for fie.eciog in 1976-77.

APPENDIX 2P.ge 2

DMUSTRIAL FQ4ECTS lNDER PREPARATION

Creation Elanats ofor ien.M/kon. DasanCts Tpl¶-.ioeon

Project Total Cot ktlia PrCo-ter NAte of letvrn A*ailable 1975 1976 1977 1978 I979 19BS 1981 1982 N-nt Stepa Proble

2. Other Projects Fe-sibhlity sd disasssipaWj j

A-oit.-Ure- 10,500 Crsatie Governreot n.a. Opportooity D. Dsei:n Det-tled rate of retun,

Toeatavs N-REN study by UNIDC _ Engine ring tlculetin. Dseisioe byProposal of =Prsssnttto :0 finoion Govt. en procoter'sProeo tr sub- proposal. Prt of sngin.rt.og

Itdted to Govt praetitJlly redy. Dependsen re litien of 8090

C. CONSTRUCTION MATERIALS

1. 1976-77 froeists

Fiberboard 85 ErtsoNion PAbOIAD n.. Opportunity _U pdti=S of o-porta-.ty t104y Updating of opportunity study

T.noe.rive (nJ.ority study by . D..ision and prsenta.tn for fioco (rate of retorn calulatien)

public Aostrlin con- , O.o-nstrsctio cing

enterprinsa) *ultasts

Cerosios 300 ITtsreotnd Ilports of Note- Fssitility Opportunity study by April

Pototital F1876 adl- r PronsetatiLn to -nsoces of finaing 1976. Finl de-ieio by

prosaster lin in 1972 Coantupstisa pressoter

(througb BDI)

Vlvebags (for eesset) 260 Interested Prefasobility F taolillity Feasibiliry tudy

potseticl stdy Pe. entatin to sioures o fioat.4og Pinel decisien by pro-oter

proeter , Con-t-uction Infr--trucours (coed)

(throsgh BDPI) studies

Totol 1976-77 Projects 645

2. Other Pro.jeot

Ch-lk (for rood 1,200 NO n.- FPoibility Feo-ibili:y Teat of roteriole

oceetrooti-o) study belog o Deo:i-en Det-iled rote of retort

TIleor done . , .gseicg oI.. alcuition. D.sisionz Pressotstiet fee fL-,ooing by oosesaot 0o

Cons~~tictioci loc...loc of plantStsech for p"ator

Ceo.ot feotory 6.750 Eitsesien NO I-enl Notss G-olebicel aed feas..iliry GOologiosl studisa

Thle-r (7) rsrket of D= eci.io- DPtailed rats of retort

170,000 t/ , Engln-- ing oeco-latioo s dteioene

p.. vhile = Pr.sstatior for fLscsAg locectio. Studies of

prostne plnc , Coescrezioo ictrastruccore (road ofcepacity is 293 kt if sits is in

65D000 t Tulsar;irpd -ooId alsobe oeeded for peper pulpproject)

Gla-s (other thee 400 Intrsested Notes _ Opp-rtotity study Opportunity tody to be

bottles) potentil cossplst-d by Ju-c 1976.

prosoter Project dependent enesport narket. llteiljd

rate of r.etort oeloultien

0. NECHAONICAL h ELECTRICAL IND.

1. 1976-77 Pro1ects

Bolts nd Screws 290 Etteosimn NECREN n.. Opp-rtunity sD-eision Egin ering study

Iieso-oueros (rJority study by ngine-ioBpublic UNIDO P F-.- nt ion to finuncnscnterprise _ Crnst_uo lee

Bicyole asseebly 120 IDENTIFUID n. Prefeasibility _. Feasib-lity -4d nNgiceering studier Possibility underway

- (BDPI) study X 'ressnttien t. fi-an.sg

Tota1 1976-77 Projsets 410

2. Other Projects

EUlcerio o-bles 120 NO n... Undarstudy . .... sib lity Co.plstien of feasibility

(BDPI) Engin_rirg Finding patar

Loc)k 250 NO Ondsrstudy PFesiiility =nd ngn in studies Conpltin of feaibility(BDPI) Finding pe-tsr

Asrieoltu-1 eachienry 300 Psopl.s' n. P ref-sibility - .. aslillity Feas ibility study by

TUleer or Taoatavn Replblio a D.siinn November 1976of thine Hg.-acing

& publi.c . .(ntr- ctetn

-terpris.s

E. IMING 6 InEMRAL PRODUCTS

1. 1976-77 Proisnts

Titeniun lends (ilsnits) 2,800 Crietion Goet, l n Feasibility aetd i by 0tt subj-ct te os9otiaAens w,prrtner Pilot plant tEsts

Tassenaw jltendisn study nicE plet

interested r Pre-.stati-n for tianeLg

Conotretion

Ch.racoI s0 Crtetion Dntnr.stod n.a. Study underway P -r.snotat on to inanci.g Gourcs Cosipletion of f.saibility

_ (through BDPI) study

TotAl 1976-77 Projects 2,850

L/ Proje-ts npected to be pr e.oted for fico..ing in 1976-77.

APPENDIX 2

Page 3

flDSThIAL PROJICTS UNDER PREPARATION

Creation Elate ofor VE /hnns Donats al tnticn

Protect Tntal Cot oRtnsia Proter ofi If latunn A Ilable 1975 1976 1977 1978 1979 1980 1981 1982 Next Steps Probloes(Ft aillion)

2. Other Projects

Titaniun Sfods 11 3,000 Creation GOvt. 15% nRa Ealiation ill de.end on result- of Tiznnis S;ander(Fort-Dauphin) U.S. Steal

interested

Ttsniut-Sande IIl 3,000 Creatio Govt. 51% sR Reliation ill dc-cod on result of Tionsiun Snsstl(linantenina) 8BGK inte-

rested

Gres Bitoniseun Unkenon Only s idesat this stage

b .. ite-Alu.ine 136,000 Creation Several n.. Preli- ry S-vurol ye.r5 bef-re iepints iospr ter. studiesbeingconsidered

Iron-Chrcoi, 4,700 Cre-tion Contr cts -orld -srket -Prefsasibi- 'rsfssbility 1) Feasibility byAndrisona with PYehi- price PM lity by ,. Fe.sib-lity C .. dian tres

ney/Japan 210,000/ton Peohiney. =Decisin 2) Preroquisit-comared to -Purt of engi- _..., _ineerig Roge electric plantF1G 142,000 n.ering(da) x Presentat so for finanong 3) negotiations within Hsdagn - .one trettio_ promoterscar eif 4) price of electricityEurope. ossooed 1n the tpr--k1 satina- joct is a questionted at 18% otrk, it should be(including about FMG 8k/hinirsetruc-

F. THER PROJECTS 1 tore)

1. 197D-77 Pruou-to

SOTEMA (textiles) 6,-'75 Extenui-o YES n Prefeu.ibi- Fo-sibili ylity De. iion _.d pre -ntnti n fur tineni-ig

Detergents 80 Crestico YES n.a. Understudy t . , nnsibiAity ano ergin-ering tudies Presentation to(BDPI) (BDPi) s Pr-sentat so to isanclag fi..ncing

Solar waterbecter 50 Creatiso NO n Understudy X Feasi-ility _nd csgneerin; studi=n Completion of feasibility(BDPI) (BDFI) x P.e.ent-inn to finnncong Finding prnomter

S-wiog -oohiiee 50 Creation YES n.e Prefeaasibilit_......,ves ibilit- and e.gilneezn.g ut.us Completion of feasibility(BDIP) x Preontstin to fnac_in._ Pres.ntotion to finanning

Ballpoints 110 Creation YES n Fa Peasihility u Pre.oatstion to fiun.cisg Presentation to financing(BDPi)

Hygienic tapon 100 Creation YES n Pref P .ea. ihilithi and onginaerg Feusibility and cngiseering(thomugh a Presentation t- finaningSOMET)

Furniture & tnyn 120 Extension YES o.a. Prefeasibilit- FPsibil ty -ad engine-ring Feasibility cnd eogineerisgx Presenstion n fi-osing

Polyethyleoe Bags 420 Fxtension FITIM oa Feasibility a D.nisiomM janga study u Preseztniom to financing

Cons ruitio_

Total 1976-77 7,7C5

2. Other Projects

Caustic nods 300 Creition NO n.. Understudy Unkonm Depends on realiection(BDFi) (SDPI) of Mangoro Paper

Pulp project

Sowing throad 150 Creatinn Interested n Understudy = Prnesetation to fin_ncing Final decision by pronot-rpotenti-lpromo ter(through BDFI)

P Frojects eapectod to be ..esented for financing in 1976-77.

ANNEX III

THE PARASTATAL SECTOR

TABLE OF CONTENTS

Page No.

I. THE SCOPE OF THE PUBLIC SECTOR .. 1............................ I

The Present State of Government Controlover the Key Sectors .............. . .................... 2

II. THE DIFFERENT FORMS OF PARASTATAL ENTERPRISES:MAJOR EXAMPLES ............................................... 4

A. State Corporations ................................. 4

SINPA ............................................. o........ 4

SONACO .... . ...................................... 5SINTP ................................... 7

B. Commercial Firms under Government MajorityControl ........................ ............................. 7

Air Madagascar ........ ..................... 7

SMTM ..# .............................................. 8

The Commercial Banks .. ................. 9

C. Other Commercial Parastatal Organizations .... ...... 10

The Railways (RNCFM) ...... ....................... 10Tamatave Port Authority .................. ... .... 11

III. THE PARASTATAL ENTERPRISE SECTOR: THE MANAGEMENT ISSUES .... 12

Personnel .............................................. 12Tasks ................................................. 13

Management Systems ........ ....................... 13

Channels of Communication ...nio .......................... 13Incentives ............................................. 14

Control .... .......................... 14

IV. A NEW FORM OF PARASTATAL ENTERPRISE ......................... 15

APPENDIX: List and explanations of acronyms used in Annex III.

ANNEX IIIPage 1

THE PARASTATAL SECTOR

1. Until 1972 Madagascar's public sector consisted of a number ofstate farms, crop marketing organizations, the railways, ports, posts andtelecommunications and a few commercial enterprises under governmentcontrol. Following the change of Government in 1972 a decision was takento greatly expand the public sector, mainly by the creation of new statecorporations. With President Ratsiraka's accession to power the trendtowards public ownership has been accelerated by nationalizing major privateenterprises, mostly foreign-owned.

2. The policy of increasing state participation in commercial andproduction activities is motivated by a desire to create a socialist statewith control of the economy firmly in Malagasy hands. The implementationof this policy has given rise to serious management problems. Recognizingthese, the Government has recently adopted a new and imaginative approachaimed at creating efficient and viable parastatal enterprises. This Annexdescribes the present situation of the parastatal sector, discusses the mainproblems which have arisen and briefly reviews the Government's plans for thefuture.

I. THE SCOPE OF THE PUBLIC SECTOR

3. The National Development Plan 1974-77 lists external trade, miningand energy, insurance and banking, transportation, the pharmaceutical industryand the cinemas as key sectors to be placed under government control. Thesesectors were selected either because they were "almost exclusively dominatedby foreign interests," (e.g., mining, external trade, banking and insurance),or because "the collective interest was not compatible with the exclusivesearch for private profits," (e.g., the production and/or distribution ofessential commodities). The Charter of the Socialist Revolution (the Charter)builds on the concept of key sectors without being much more explicit. Itdoes, however, mention a new criterion, namely, government control of the mainunits of production. The list of key sectors given is nonetheless virtuallythe same as the Plan's.

4. There remains uncertainty as to the future scope and nature ofpublic ownership. The list of activities to be nationalized quoted in the Planand in the Charter cannot be considered exhaustive. For instance, textiles,which were not included in the list, have recently been identified as one ofthe sectors to be placed under government control. With regard to the termsof government control, the same kind of uncertainty prevails. As explainedbelow, it appears that the Government is moving towards a new structure basedon the creation of a state holding company for each sector, the main role ofwhich would be sectoral coordination and control rather than direct stateentrepreneurship. Uncertainty is to be expected at a time when the economyis undergoing a major structural reform. There are, however, dangers forthe economy if uncertainty continues over an extended period, particularlyas private investment activity is already at a very low level.

ANNEX IIIPage 2

The Present State of Government Control over the Key Sectors

5. Three state corporations (Societes d'Interet National pour laPromotion de l'Economie -- SIN) have been created since 1973. At the end of1973, SONACO 1/ was formed to undertake the distribution of certain essentialimports and exports, and SINPA 2/ to market key agricultural products, mainlyrice and groundnuts; both were made monopolies to enable the State to haveabsolute control over the distribution of key commodities. SINTP, 3/ startedin 1974, is a state contracting company which competes with private contract-ing firms; the main objective was to increase the competitiveness of biddingon government contracts.

6. In July 1975, President Ratsiraka announced that the State wasto take full ownership of foreign-owned insurance companies and commercialbanks as well as of the cinema industry. Compagnie Marseillaise (CMM),the largest import-export firm in Madagascar, was nationalized in September1975. It should be noted that Government already owned an interest in twoother large trading firms: SOGEDIS and SOMACODIS. The shipyards at Diego-Suarez, which had formed part of France's naval base, were taken over bySECREN, a public enterprise created for that purpose. The National MilitaryAgency for Strategic Industries (OMNIS) 4/ has been set up to oversee SECRENand other strategic industries. Mining resources have been nationalizedand the Government proposes to take majority control of large mining pro-jects in partnership with foreign private interests through the intermediaryof SONAREX, 5/ a state holding company under formation. In the petroleumindustry, control has been taken over the Malagasy Refining Company (SMR).6/Government control over the air and sea transportation sector has beenreinforced by majority control over the Malagasy Company of Maritime Trans-port (SMTM), 7/ which is engaged in international shipping, and the PetroleumCompany of Madagascar (PETROMAD), 8/ which is engaged in coastal shipping.Air Madagascar, the national airline, is presently 70 percent state-owned.

7. The traditional public services have been under government controlmuch longer. Many of them, like the Railways (RNCFM), Posts and Tele-communications, the Matches and Tobacco Board 9/ are run as departments of

1/ Societe Nationale du Commerce. For a list of acronyms, see the Appendix.2/ Societe d'Interet National pour les Produits Agricoles.3/ Societe d'Interet National de Travaux Publics.4/ Office Militaire National des Industries Strategiques.5/ Societe Nationale de Recherche et d'Exploitation Miniere.6/ Societe Malgache de Raffinage.7/ Societe Malgache de Transports Maritimes.8/ Societe Petroliere de Madagascar.9/ Regie des Allumettes et du Tabac.

ANNEX IIIPage 3

the administration and not as parastatal enterprises, while the autonomyof the Tamatave Port Authority (PAT) is largely fictional. Energy andwater supply, on the contrary, depend on two autonomous parastatal enter-prises, SEM and SMEE, now merged under JIRAMA, 1/ the first stateholding company to be formed.

8. Finally there is a group of public enterprises established toundertake agricultural development; these include regional developmentcompanies such as ODEMO, SOMALAC, SODEMO, SOMANGOKY and state farms suchas OMBY. This list is by no means exhaustive.

Table 1: PUBLIC SECTOR: MAJOR ENTERPRISES

Trade and Distribution Transportation

SINPA (agricultural products) RNCFMExport-import and wholesale trading: Air Madagascar

- SONACO SMTM

- CMM PETROMAD- SOMACODIS PAT- SOGEDIS CNAM (planned) /a

Banking and Insurance Energy and Water Supply

Malagasy Development Bank (BNM) (SEM)Insurance Companies (SMEE)Commercial banks JIRAMA /a

- BFCMM- BCIM Communications- BAMES- BCM Post and Telecommunications

Industry and Construction Agriculture

SMR ODEMOSECREN SOMALACSINTP SODEMO

SOMANGOKYSONATEX (planned) /a State farmsMatches and Tobacco Board

Mining Auditing and Data Processing

SONAREX (planned) /a OMEGA (planned) /aSIGMA (Planned) /a

/a State holding companies.

1/ Created in November 1975.

ANNEX IIIPage 4

II. THE DIFFERENT FORMS OF PARASTATAL ENTERPRISES: MAJOR EXAMPLES

9. Of the various types of parastatal enterprises, those havingthe greatest impact on the economy include the state corporations, com-mercial firms under government majority control and a variety of othercommercial parastatal organizations. Examples of the main categoriesare described below, followed thereafter by a discussion of wider manage-ment issues.

A. State Corporations

10. The State Corporations are 100 percent state-owned but financiallyautonomous enterprises that have been created as "instruments for the execu-tion of the economic policies defined for each sector by the Government."Despite the apparent intention that they should follow standard commercialmanagement practices, the State Corporations by and large have failed tofulfill this objective. In particular, SINPA's and SONACO's present financialsituation and their adverse impact on the distribution system give rise tograve concern. Since they operate monopolies, the effectiveness of theirmanagement is of particular importance for the economy

SINPA

11. SINPA was created with the objective of eliminating intermediariesin the marketing of rice and of obtaining better control over the entiredistribution network for Madagascar's most vital commodity in the context ofrecurring shortages. It thus replaced a network of more than 100 privatetraders, mainly Indians, who used to provide transportation, credit and othercommercial services to the farmers. SINPA does not provide credit directlyto the farmers. It attempts to collect, process, store and market agriculturalcommodities, partly with its own limited equipment and partly by sub-contractingto private entrepreneurs. It has 2,300 agents organized in zones and about 110staff at its Tananarive headquarters. Each sub-prefecture constitutes a zoneand the zones are grouped into nineteen branches.

12. The company handles nine products; it has a monopoly over three,namely rice, maize and groundnuts. SINPA agents, or delegated organizationslike SOMALAC, collect from predetermined purchase points at the village(fokonolona) level. The storage and processing operations are generally con-tracted out. Distribution is undertaken in accordance with instructions fromthe Supply Department of the Ministry of Transport and Supply at the inter-regional level and from the provincial governors at the regional level.

13. SINPA has encountered many difficulties. Its agents are unreliableand in certain villages no collection at all has taken place. In part thesedifficulties stem from the unreliability of private trucking contractorsfor whom rice transportation is one of the less profitable operations. In anyevent poor roads, compounded by inadequate maintenance, leave many villagesvirtually inaccessible for many months each year. In certain areas, and to anincreasing extent in 1975, the Army has had to be brought in to assist with

ANNEX IIIPage 5

the collection of the crops. This situation is particularly disturbinginsofar as a deficient collection system (i) counteracts the measures to boostrice production, and (ii) causes unnecessary shortages which are relieved bycostly rice imports. 1/

14. SINPA's difficulties are due to many different factors. First,the organization was formed by the fusion of a variety of existing entities -namely the Rice Marketing and Stabilization Bureau (BCSR), the Organizationfor Agricultural Equipment and Modernization (CEAMP) and seventeen communalSyndicates; it inherited their respective staffs, which were generally inade-quately trained. Subsequently, it has been unable to recruit sufficientlyexperienced high level staff. Second, it has lacked transport and otherequipment necessary to carry out its functions effectively. Third, it hasbeen obliged to operate with an inadequate financial structure with insuffi-cient working capital. Fourth, the fokonolona, which are the primary agenciesin the marketing process, are mostly very inexperienced. Fifth, the legal andadministrative framework within which SINPA has been expected to operate isconfused. Many different government agencies are involved in the marketingand distribution system without effective overall coordination.

15. The mission was unable to obtain up-to-date accounts for SINPA soits financial position is not clearly known. It claims that its financialdifficulties are due in part to its price equalization role and the massiverice imports on which it supposedly received no margin. This explanation canhardly be sufficient in view of the fact that the margin on its usual riceoperations must be at least as large as the margin which the private traderspreviously received. The Charter states that SINPA is to be reorganized,but no details have yet been announced.

SONACO

16. SONACO, at the time it was formed, took over several existingorganizations like COSYCO 2/ (the lima bean marketing organization) andOMADEX (an export promotion unit). Also it was intended that SONACO wouldgradually absorb certain stabilization funds and that it would extend itscontrol over the foreign-dominated export-import sector. This never happened;for instance, although the largest foreign-owned export-import firm wasnationalized in September 1975, it is expected to remain fully independentof SONACO.

17. The objectives initially assigned to SONACO were threefold: (i) topromote Malagasy exports, (ii) to bring about a larger diversification ofmarkets and import sources, and (iii) to integrate the distribution networksof certain key commodities. The last objective was supposed to be achievedthrough SONACO's monopolies. The first two objectives have not been givenmuch attention; the export promotion operation (OMADEX) is little more than anormal in-house marketing service.

1/ These issues are discussed further in Annex I, paras. 92-99.

2/ Comptoir des Syndicats de Communes.

ANNEX IIIPage 6

18. SONACO handles two categories of imports:

(i) Products for which it has a monopoly: These include keyproducts or commodities under government price controllike cement, edible oils, batteries and transistor radios.(SONACO turned over its monopoly of rice imports to SINPA in1975.) The margin on these products is fixed. Special pro-blems arise where world prices are higher than the controlledinternal price. In the case of rice the difference was fi-nanced by a subsidy granted by the Treasury. For other pro-ducts where no systematic subsidization is granted, SONACOmay on occasion have to cover its losses from other operations.SONACO also plays a price equalization role in respect ofcertain commodities, mainly cement, which are uniformly pricedthroughout the island.

(ii) Products with market-determined margins within legal maxima:These products include consumer goods and luxury productstraded by SONACO in competition with other export-importfirms.

19. SONACO states that its overall import operations have been onlymarginally profitable. In particular, the monopoly operations are reportedto burden the import operation as a whole and make efficient competitionwithin the second category all the more difficult.

20. On the export side, there are also two main categories of goods:

(i) Products for which SONACO has a monopoly: The main productis lima beans and other beans produced in the south ofMadagascar. Lima beans have provided SONACO with a verysubstantial part of its profits; otherwise SONACO wouldprobably show a loss. The mark-up for SONACO on the limabeans has been as high as US$700/ton when the price reacheda peak of US$877/ton on the world market. Thus high profitshave been achieved at the expense of the farmer who has beenpaid an extremely low producer price.

(ii) Products handled under competition: SONACO trades in meatpreparations, cocoa and cashew nuts in competition with otherfirms. It also exports coffee and pepper for the respectivestabilization funds on a commission basis.

21. As in the case of SINPA, SONACO's accounts are subject to question.During its first year, SONACO reportedly made profits totaling about FMG 450million. In 1975 profits are reported to have halved as the world pricefor lima beans fell from US$877/ton in 1974 to US$570/ton in 1975. However,the completeness of SONACO's accounting statements is open to doubt; inparticular it is uncertain whether full account has been taken of inventorylosses. There is reason for concern over SONACO's capital structure and

ANNEX IIIPage 7

general solvency. A rather large debt, on the order of FMG 3 to 4 billion, iscarried by a small, only partly paid-in equity base of FMG 120 million.SONACO is said to hold substantial unpaid accounts and has had difficulties ingetting further deliveries of certain goods.

22. SONACO's future is uncertain. Consideration is being given torestructuring the entire external and wholesale trade system which includesSONACO, CMM, SOGEDIS and SOMACODIS. One possibility would be for CMM totake over SONACO; another might be to distribute the marketing and distri-bution activities to the different state holding companies under formation.The latter solution does not exclude the first as it would necessarily evolveout of a longer term program.

SINTP

23. SINTP is the smallest among the State Corporations. It was createdin early 1974, reportedly to get a better idea on the cost structure of avital business - contracting - hitherto dominated by four French and twoItalian firms and to promote the progressive malagasization of the sector.

24. SINTP is more exposed to competition than SINPA and SONACO sinceit has no monopoly whatsoever and is not supposed to benefit from any pre-ferential treatment. It has been slow to start operations. Equipment orderedhas not arrived promptly, owing to a large demand for construction equipmentin Middle Eastern countries, causing SINTP to miss important contracts. Itis as yet an inexperienced organization, but it now owns some of the mostmodern equipment and thus could have a competitive edge over other large con-tractors operating in Madagascar. The net value of SINTP's fixed assets isFMG 1.4 billion and the equity amounts to FMG 800 million. A large part ofits equipment was financed by foreign suppliers' credits.

B. Commercial Firms under Government Majority Control

25. In contrast to the State Corporations which have been created fromscratch with a special legal and organizational structure, there are a largenumber of companies, established under the normal company legislation, overwhich the Government has taken majority control. Government participation inthe share capital varies from 51 percent (e.g., SMTM) to 100 percent (e.g.,commercial banks) and in some cases the change to majority control has beenvery gradual. These firms mostly appear to operate in a satisfactory way.The companies described below may be considered illustrative of this group.

Air Madagascar

26. Most air services in Madagascar are provided by Air Madagascarwhich is 70 percent state owned, the balance of the share capital being heldby Air France. Its main international routes are Europe-bound via EastAfrica, together with a regional network (Comoros, Reunion, Mozambique and

ANNEX IIIPage 8

soon Mauritius). Its sole direct competitors are Air France and Alitalia.

The internal network is one of the densest in the world.

27. Total passenger demand dropped after 1972 and the subsequent

recovery has been delayed by the general economic recession in 1974. Air

Madagascar appears to have slightly increased its share of the market at

the expense of its competitors. It is estimated that its present fleet

of 14 aircraft (including three long distance jets) should be adequate to

meet the company's needs for the next ten years. To date it has adopted

a restrictive policy with regard to charter flights in order to protect

its own regular traffic. This policy is consistent with the 'selective'

tourism strategy followed by the Government. Air Madagascar's internal

air freight traffic has started to expand after a long period of stag-

nation. Freight traffic to and from Europe could also be developed both

through greater regional cooperation and by closer contacts with exporters.

28. Air Madagascar has diversified into different activities through

its subsidiaries, including the promotion of a hotel at Nosy-Be, travelagency services, road transportation, car rental services and insecticide

spraying.

29. Within guidelines set by the Executive Board comprising eight

Government representatives and one Air France delegate, management takes

investment and operating decisions with the flexibility required for suc-

cessful business management, even though it occasionally receives directives

of a specific or a general nature from the Ministry of Transport. However,

ultimate government control has not prevented management from producing

profits and aggressively diversifying the activities of the company. The

company is managed according to sound business principles. It has realized

profits of about FMG 60 million from a turnover of FMG 6 billion and does not

receive government subsidies. The management personnel is now 100 percent

Malagasy. This has been realized very effectively through a gradual promotionof young Malagasy graduates who have been trained mainly on-the-job.

SMTM

30. SMTM, 1/ one of the largest enterprises in Madagascar, is involved

in international and coastal shipping, both on its own account and through

its subsidiary PETROMAD. 2/ The Government took 20 percent of the equity

capital when the company was formed in 1962, and increased its share to

51 percent in July 1975. Six members out of twelve represent the State on

the Executive Board and exert control over the company's operations, under the

general supervision of the Ministry of Transport.

1/ Societe Malgache des Transports Maritimes.

2/ Compagnie Malgache des Transports Petroliers.

ANNEX IIIPage 9

31. The pace of operations has not been upset by the Government'sacquisition of a majority shareholding: JMTM has kept its foreign associatesand has ambitious investment plans. SMTM's main business is transporting drycargo to and from Europe and PETROMAD' is the coastal shipping of petroleumproducts. SMTM's fleet includes two cargo vessels and a banana boat. It hasa 12 percent share of the CIMACOREM traffic (regional shipping conferenceincluding Madagascar, Comores, Reunion and Mauritius) and about 25 percent ofthe international shipping business to and from Madagascar.

32. SMTM's investment plans amount to FMG 10.5 billion for the five-year period 1976-80, out of which FMG 4.5 billion will be for the purchaseof a large tanker. The tanker would be operated by a subsidiary of SMTM andlegally owned by CNAM, the future state holding company for the sector.l/SMTM's cash flow amounted to FMG 550 million for the last fiscal year.Management is in the hands of Malagasy in collaboration with representa-tives of the European associates of SMTM. Recruitment for management jobstends to take the form of in-house promotion because of the specific ex-perience required and the difficulty of finding people with suitable manage-ment training.

The Commercial Banks

33. Madagascar's four commercial banks were nationalized in June1975. 2/ They have nevertheless kept their status of commercial firms and nomajor change has yet taken place with regard to their policies and operations.There are no more than 40 expatriates left within the four commercial banksand management is almost entirely in the hands of nationals at all levels.The commercial banks follow standard banking practices, functioning as depositbanks. Banks generally do not participate in the equity of businesses. Onlythe Banque Nationale Malgache de Developpement (BNM) in fact contributes tothe equity capital of existing or new ventures.

34. There is no specialization among the existing commercial banks.Some may be more active than others in certain fields, like external trade.The bulk of the credit commitments are short term loans to businesses, someconsumer credit and a limited amount of medium term loans. Constructionand long term loans are not handled by commercial banks in any significantamount. There is a money market between the four commercial banks andthe BNM, the operations being centralized by the Central Bank.

1/ CNAM would take participation in shipping companies like SMTM, PETROMAD,CMN (Compagnie Malgache de Navigation) and port service firms.

2/ They were: Banque Financiere et Commerciale Malgache Mandroso (BFCMM);Banque Malgache d'Escompte et de Credit (BAMES); Banque pour le Commerceet l'Industrie de Madagascar (BCIM); Banque Commerciale de Madagascar(BCM) - all connected to large French banks.

ANNEX IIIPage 10

35. The level and term structure of interest rates is largely set bythe professional banking association (APB) composed of representatives ofthe four commercial banks. The Central Bank (BCRM) has the power to determinethe interest rate structure but has intervened little except by varying theterm deposit rates and by exerting indirect control through the discount rate.This experience has shown that government control over an industry need notuproot the professional or operational practices necessary for sound management.

36. The Charter calls for a major reorganization of the banking systemto enable the different sectors (e.g., agriculture, trade, industry, etc.)to have their own specialized financial institutions. Details regardingthe implementation of this policy have yet to be elaborated. Except in thecase of agricultural credit, the benefits from specialized financial institu-tions are not conclusive, since there are practical advantages in having onebank catering to the various needs of a customer and centralizing in one placeall the information concerning his business. Moreover, specialization wouldmean redistributing bank personnel, causing problems in placing formerlyindependent in-house specialists.

C. Other Commercial Parastatal Organizations:

37. This category includes not only the railways, the ports, posts andtelecommunications, but also government commercial organizations, such as theTobacco and Matches Board. I/ Although in theory autonomous, the latter infact retain some of the characteristics of a government department, especiallywith regard to the financial control exercised by the Ministry of Finance.Many fall under legislation providing for the establishment of "public bodiesof an industrial or commercial character". Although only two organizationsare described below, the other organizations of the same type generally ex-perience similar problems.

The Railways (RNCFM) 2/

38. The RNCFM operates two interconnected systems, one linkinR Tamataveto Tananarive with extensions to Antsirabe and Ambatondrazaka, and the otherlinking Manakara to Fianarantsoa. These total approximately 650 trackmiles. Passenger traffic grew by 48 percent between 1970 and 1975, reaching270 million passenger/kilometers. The amount of freight carried, however,

1/ Also various agricultural development enterprises such as FAFIFAMA.

2/ Reseau National des Chemins de Fer Malgache.

ANNEX IIIPage 11

fell slightly over the same period.l/ An increase in the amount of chromitecarried was balanced by a decrease in the volume of imports transported.

39. The RNCFM became an "etablissement public i caractere industrielet commercial" in 1974. The organization is, however, closely supervisedby the Ministry of Finance (by means of a financial controller) 2/ in fi-nancial matters and by the Ministry of Transport in technical matters.As a result the management of the railways has limited flexibility indeciding,on such matters as procurement and staff administration.

40. Recently the operations of the railways have been studied byconsultants who have recommended that R1TCFM be given greater autonomyin order that it may become financially viable, adopt modern managementmethods and administer its personnel so as to take into account thespecial requirements of a railway organization. If these recommendationswere accepted, the railways might move more towards the management situa-tion enjoyed by the commercial companies under majority government control.

Tamatave Port Authority

41. The Tamatave Port Authority (PAT), 3/ which manages Madagascar'smost important port, was established in 1970 as an autonomous parastatalorganization within the framework of the general government budget. Inpractice it has little autonomy; as in the case of the railways, its fi-nancial activities are supervised by a controller from the Ministry ofFinance, whilst in technical matters it is subject to the direction ofthe Ministry of Transport.

42. The Authority has not been permitted to charge a tariff suffi-cient to cover expenses. For example, wage increases up to 40 percentwere granted in March 1975, while tariffs were selectively increased byonly 20 percent in September 1975. Consequently losses, which totalledFMG 375 million at the end of 1974, 4/ have continued to accumulate. Auditedaccounts for 1972 were still not available at the end of 1975.

1/ See also Annex V, Table 8.5.

2/ Agent comptable.

3/ Port Autonome de Tamatave.

4/ Provisional estimate.

ANNEX IIIPage 12

III. THE PARASTATAL ENTERPRISE SECTOR: THE MANAGEMENT ISSUES

43. The rapid expansion of the public sector, which has been motivated

by an understandable desire to place the control of the economy in the handsof Malagasy and to ensure that the national interest is adequately con-

sidered, has given rise to a number of problems relating to management andcontrol. It would appear that the most serious problems encountered bymost parastatal enterprises - though to a lesser extent in the case of

commercial firms in which Government has a majority participation - may begrouped under the following headings: personnel, task definition, manage-ment systems, channels of communication, incentives and, lastly, control.

Personnel

44. The lack of experienced managers is a general problem in Madagascarand a severe constraint to the development of the public sector in particular.To a considerable extent the difficulties encountered by many parastatalenterprises seem to originate in the attempt to solve this problem by staff-

ing top management positions with civil servants. This has had seriousconsequences:

(a) First, key executives in the State Corporations, and also inthe traditional public enterprises continue to benefit fromthe job security enjoyed by civil servants. This sheltersthem from any personal risk for their actions. The resultinglack of responsibility in decision-making has caused con-siderable damage to the economy. Second, because top civilservants know that they will not necessarily remain with apublic enterprise, their personal horizon might be muchshorter than would be desirable for many key businessdecisions.

(b) Concern about position and authority frequently arises inany formal or hierarchical organization such as the publicservice which, if transferred to a commercial organization,may have an adverse impact on the viability of the enterprise.The risk is that rivalries may arise which may lead indivi-duals to conceal information essential for good management.

(c) Finally, civil servants lack business management training.Madagascar has never had any training institution whichproduces top administrators with a knowledge of bothpublic and commercial management. The National AdministrativeTraining College, 1/ which could possibly have provided high

1/ Ecole Nationaled'Administration.

ANNEX IIIPage 13

level public and private management training for high-rankingcivil servants, has focused on the education of pure adminis-trators. Moreover, training at the senior level has beendiscontinued in favor of middle level staff training.The inadequacy of the accounting and reporting systems ofmost of the parastatal organizations are evidence of thislack of training.

Tasks

45. The ambiguity of the tasks facing many parastatal managers stemsfrom the assignment to the same enterprise of activities which are publicservices (e.g., price stabilization or equalization and price subsidizationfunctions) together with activities supposed to be carried out competitively.As a result, conflicts arise with a negative impact on the motivation andquality of top management which may affect all lines of business, even thosenot to be carried out as a public service. This has occurred, for example,in the cases of SINPA and SONACO.

Management Systems

46. A major problem is the absence in many parastatals of adequatefinancial statements and, a fortiori, of many other essential management tools.This is partly due to the use of government budgeting techniques. Govern-ment accounting, for instance, does not allow for depreciation (a non-cashexpense) and thus offers no basis for full-cost tariff setting. This is aproblem which has long confronted, for example, the posts and telecommunica-tions department.

47. Staff accustomed to government accounting systems often disregardor even misunderstand the normal financial reporting concepts and methodsof analysis used in commercial accounting, although these are vital manage-ment tools. As has been noted above, some parastatal enterprises have noteven produced audited accounts for two years.

48. Other management tools can be even more important to managersin monitoring operations effectively and in establishing sound financialplans. Besides cost accounting, neither current asset management nor longterm financial planning, for instance, were being undertaken by many para-statal enterprises, and this may explain much of their financial difficulty.Other management systems, like programming models for SINPA's transporta-tion operations, are not being used; here the solution might be to hirespecialist consultancy services.

Channels of Communication

49. By experience and training, civil servants tend to use verticalcommunication channels along hierarchical lines and slow formal reportingprocedures. However, most complex businesses, such as SINPA and SONACO,where inventory keeping and logistic functions necessitate considerableinter-departmental coordination, require lateral information flows and more

ANNEX IIIPage 14

rapid and informal reporting procedures. Only a very inadequate communica-

tion system can explain, for example, the mistakes committed by SONACO in itsordering of cement.

Incentives

50. The question of incentives is a complex one. Technically thereis no reason why parastatal managers should not have their remuneration

tied to results. The implementation of such a policy would however en-counter many obstacles in some of the existing parastatals. The juxta-position of public service and competitive operations in, for example,

SINPA and SONACO would make it very difficult to link remuneration to re-

sults in a simple and manageable way. Ideally, public service operationsshould be judged on the basis of cost minimization and competitive operationson profitability, but implementing such a distinction could be very difficultin practice. At a minimum a bonus system could be adopted based on roughqualitative indicators of performance (e.g., the prompt production of prop-

erly prepared accounts).

Control

51. The present parastatal arrangements do not permit effectivecontrol by Government over managerial efficiency for two main reasons:

(i) Government delegates sitting on the Executive Boards alsorepresent Government as a shareholder. In essence thismeans that one layer of control which is common in theprivate sector, namely the periodic shareholders' meeting,is omitted and that the members of an Executive Board,who are responsible for the management of an enterprise,give themselves an automatic "satisfecit". Furthermore,the delegates from the different ministries generallyhave insufficient time to devote to their function asmembers of these Boards. Finally, controls exercised by thetechnical or finance ministries, which have responsibilityfor the enterprises, are on the other hand either weak

ex post controls, or controls of a technical nature.

(ii) In many parastatal enterprises, accounting statementsare either inexistent or unreliable. Where a balancesheet and an income statement do exist, the juxtaposi-

tion in certain parastatal enterprises of public ser-vice, monopoly and competitive activities blur thesignificance of profit as an indicator of managementperformance. Computing profit separately for eachtype of operation could be very cumbersome becauseof the problems of common and fixed cost allocation.

ANNEX IIIPage 15

IV. A NEW FORM OF PARASTATAL ENTERPRISE

52. The Government plans to replace the present organization of thepublic sector by a number of sectoral state holding companies (SHC) whichwould take participations in the larger enterprises of each sector. Theseoperating companies would nevertheless be free to look for private partners,national or foreign. The SHCs would have more than purely financial objec-tives. They would implement government sector policies and provide inte-grated services to the operating companies, such as research, marketingand importing, and help in finding partners.

53. The decree containing the general statutes of the SHCs, to becalled "Societes d'Etat," has not yet been issued. If adopted, the SHCwould replace the SIN statutes, whilst the existing SIN would be phasedout or absorbed by the new system. One SHC was however created in November1975 - JIRAMA - for the water supply and electricity sectors. Plans exist forSONAREX (mining), SONATEX (textiles), CNAM (international and coastal ship-ping), ARA (laboratories and quality control), OMEGA (auditing) and SIGMA(data processing). Food processing could be included in a more distantfuture.

54. Civil servants joining the SHCs would have to resign from the CivilService. The delicate question of comparative salaries between SHC and civilservice careers is currently being considered. The Government proposes totackle the problem of staffing the parastatal companies with competent mana-gers, well-trained in modern methods, in three ways. First, the Governmenthopes to attract back to Madagascar expatriated Malagasy managers and engi-neers. Second, expatriates could be employed during the start-up phase andthe salary differential viewed as an investment rather than a current cost.Third, an Executive Training Center 1/ would be established to train civilservants, businessmen and engineers in modern management methods. For theimmediate future, the only viable solution would be to send a larger num-ber of Malagasy chosen from among civil servants and businessmen to shortintensive management courses abroad. On their return, some could assistin establishing similar management courses in Madagascar which should havemore practical orientation than those now being offered at the University.

55. The most interesting feature of the SHC is the proposed system ofcontrols. A Controller-General would be nominated by the Head of Governmentfor each SHC. He would have free access to any type of information at alltimes (preventative control) and scrutinize the Board's performance on be-half of the sole shareholder (thus eliminating the Board's present lack ofaccountability). The Controller-General's job would be assigned either toan individual with outstanding knowledge in the field or, more likely, to anaudit firm (see below).

1/ Centre de Formation des Dirigeants, probably within the frameworkof the Institut National de Promotion-Formation.

ANNEX IIIPage 16

56. One should, however, point out that the Controller-General's jobis much more than an auditor's job. Indeed, the statutes of JIRAMA containa reference to the "commissaire aux comptes." 1/ The Controller-Generalwould not only audit the firm in a more complete and detailed way than isnormal for an accounting auditor, but would also evaluate whether the enter-prise's operations and results conform to the Government's policies andplans for the sector. Moreover, he could recommend to the Government measuresthat could facilitate the execution of government policy or even changesin policy.

57. The SHC statutes would also establish the principle of an active andresponsible Board. About half the Board, in effect, will be composed ofgovernment representatives, not necessarily civil servants, nominated fortheir outstanding expertise in the field. The staff of the enterprise willalso be represented. Board members will be judged according to their perfor-mance, and their remuneration will partly be based on results, whereas SINBoard members were not paid at all. The Director-General in turn is to beresponsible only to the Board, which determines his compensation and mayrelate it to his performance.

58. To implement these plans, the Government is considering creatinga SHC (OMEGA) which would provide a full range of auditing and managementassistance services as well as take participation in, or sub-contract to,other audit and consulting firms in the field. OMEGA would be accompaniedby SIGMA, the SHC for data processing. OMEGA might have two or three addi-tional and related functions: (i) management assistance in the field of gen-eral and cost accounting systems, reporting procedures, organization, finan-cial and even strategic planning - to follow up on any shortcoming revealedby the "preventative control"; (ii) centralized engineering services; and(iii) responsibility for a "Centre de Formation des Dirigeants" which is tobe created.

59. During the start-up phase, the Government is considering seekingthe services of an international accountancy firm. The advantage of thisis that such firms follow rigorous accounting practices. Also, they offerother 'management services* in the field of cost accounting, reportingand control systems which would seem particularly valuable in the lightof the management problems referred to above.

60. The Government's plans for reorganizing the parastatal sector areimaginative. First, better control over the key sectors is likely to beachieved through well-staffed SHCs and the close scrutiny of a powerfulController-General, rather than by attempts at direct state enterpreneurship.Nonetheless one matter for concern is the implications of the extended roleattributed to the Controller-General, whose power of investigation and rec-ommendation ranges from operations all the way up to advising the Government on

1/ Auditor.

ANNEX IIIPage 17

desirable changes in sector policy. One could argue that sectoral policy-making should not be influenced by the same people who judge whether theoperations of a parastatal enterprise conform to established policy.

61. Secondly, the SHC structure effectively addresses the key manage-ment problems of the public sector, mainly in terms of people, systems andcontrol. The very idea of a holding company implies the leveraged use of ascarce resource, in this case trained parastatal managers. Controlby means of the Controller-General and full disclosure, coupled with auditingand appropriate management assistance, would undoubtedly contribute in futureto solving the present problems of inadequate accounting systems and finan-cial mismanagement. It is most important that parastatal organizations berequired to make prompt and detailed reports on operations. An explicit re-quirement to publish within nine months of the end of each year an annualreport to the responsible Minister, including summarized audited accountsand a description of the operational results obtained, would serve as amost useful control tool. The report could also be submitted to the futureNational Assembly.

62. From the private investors' point of view, the establishment ofSHCs, acting as sector coordinators and providing services to operatingcompanies, could be seen as a shift from a type of government control based onrestraint to one based on the promotion of initiatives within the frame-work of sector policies.

ANNEX IIIAppendixPage 1

LIST AND EXPLANATION OF ACRONYMS USED IN ANNEX III

APB Association Professionelle de Banques Professional Banking

Association

ARA State holding company forlaboratories and foodcontrol (planned)

BAMES Banque Malgache d'Escompte et de Credit Commercial bank (nationalized)

BCIM Banque pour le Commerce et l'Industrie Commercial bank (nationalized)de Madagascar

BCM Banque Commerciale de Madagascar Commercial bank (nationalized)

BCRM Banque Centrale de la Republique Central BankMalgache

BFCMM Banque Financiere et Commerciale Commercial bank (nationalized)Malgache Mandroso

BNM Banque Nationale Malgache de Development Finance CompanyDevelopPement

CIMACOREM Regional shipping conference forMadagascar, the Comores,Reunion and Mauritius

CMM Compagnie Marseillaise de Madagascar Trading firm; nationalized

CMN Compagnie Malgache de Navigation Shipping company

CNAM State holding company for inter-

ational shipping (planned)

COSYCO Comptoir des Syndicats de Communes Marketing cooperative of thecommunes for lima beans (merged)

FAFIFAMA Fampivoarana fy Fiompiana Admin'ny Agricultural development enterpriseFaritra Andrefan'i Madagasikara

JIRAMA Jiro Csy Rano Malagasy State holding company for eletricity

and waterproduction and distribution

ODEMO Operation pour le DeveloDpement du Regional development companyMoyen Ouest

OMADEX Office Malgache d'Exportation Export promotion agency within SONACO


OMBY Ferme d'Etat State ranching

company

OMEGA State holding company for

auditing and managementconsulting (planned)

OMNIS Office Militaire National des Military agency overseeing

Industries Strategiques strategic industries

PAT Port Autonome de Tamatave Autonomous Tamatave PortAuthority

PETROMAD Compagnie Malgache des Transport Petroleum shipping company

Petroliers under government control(subsidiary of SMTM)

(PTT) Postes et Telecommunications Postal, telegrapgh and tele-phone service (public)

(RAT) Regie des Allumettes et du Tabac Matches and tobacco board(fiscal monopoly)

RNCFM Reseau National des Chemins de Fer National railroad (public

Malgache enterprise)

SECREN Public shipyards company

SIGMA Societe d'lnformatique de Gestion State holding company for

Malgache electronic data process-ing (planned)

SIN Societe d'Interet National (pour la State corporation

promotion de l'economie) ... (special type of public

corporation)

SINPA Societe d'Interet National pour les State corporation for

Produits Agricoles marketing of agriculturalproducts

SINTP Societe d'Interet National de State corporation for civil

Travaux Publics works contracting

SMR Societe Malgache de Raffinage Petroleum refinery (undergovernment control)

SMTM Societe Malgache des Transports International shipping

Maritime company (under governmentcontrol)


.... . Societe d'Etat State holding company(special type of publiccorporation)

SODEMO Regional development company

SOGEDIS Societe Generale de Distribution Trading company

SOMACODIS Societe Malgache de Commerce et de Trading companyDistribution

SOMALAC Regional development company

SOMANGOKY Regional development company

SONACO Societe Nationale du Commerce State corporation for importand export

SONAREX Societe Nationale de Recherche et State holding company ford'Exploitation Miniere mining (planned)

SONATEX Societe Nationale des Textiles State holding company fortextiles (planned)

ANNEX IV

HUMAN RESOUP-BES' PLANNING

TABLE OF CONTENTS

Page No.

A. EMPLOYMENT NEEDS ............................................. I

B. EDUCATIONAL REFORM ........................................... 3

Structure of the Educational System ..................... 4

Primary Education ....................... 5

General Secondary Education ............................. 7

Technical and Agricultural Secondary Education .... ...... 8

Higher Education ........................................ 8

Non-formal Education ....................... 8

Expenditure on Education ................................ 9

C. EDUCATED MLANPOWER NEEDS ...................................... 10

D. MANPOWER AND EMPLOYMENT PLANNING ............................. 12

E. EMPLOYMENT AND INCOME POLICIES ............................... 15

F. MANPOWER STATISTICS .......................................... 16

ANNEX IVPage 1

HUMAN RESOURCES' PLANNING

1. Madagascar is faced with a growing number of educated unemployed.Many secondary as well as primary school leavers are unable to find salariedemployment. At the same time the rapid expansion of academic education inrecent years has resulted in an ever increasing burden on the governmentbudget; expenditures on education amounted to 22 percent of the current budgetin 1975, compared to 13 percent in 1960. Yet Madagascar still has an acuteshortage of certain key categories of skilled manpower essential for promot-ing the development of the economy. A major reform of the educational systemhas been recently initiated, aimed at making it more relevant to the needs ofthe country. But educational planning is inhibited by the lack of basic dataon the labor force required for the preparation of a long term manpower train-ing program. This Annex briefly reviews the employment situation, the reformof the educational system and manpower planning.

A. EMPLOYMENT NEEDS

2. Comprehensive and reliable data on population and employment arenot available. Government is keenly aware of this lack. The first nationalpopulation census has just been carried out and the results are now beingprocessed. A manpower survey is under consideration. Rough estimates of thepresent employment situation, however, can be derived from a variety ofsources. 1/ Out of a total population of some 9 million, approximately4.4 million belong to the active labor force, of whom about 800,000 are inurban areas. 2/ Total salaried employment has not increased significantlysince 1970, when it amounted to 500,000, distributed between sectors asfollows:

Sector Number of Employees(thousands)

Agriculture 135Industry 98Construction 25Administration 90

(of which education) (11)Household services 45Other services 107

500

1/ See ILO Report on Employment Problems (Geneva, 1972).

2/ Includes all settlements with over 2,000 inhabitants.

ANNEX IVPage 2

Thus, only 11 percent of the active population are in salaried employment; ofthese 45 percent work in the rural areas.

3. The National Development Plan 1974-77 projected that the activepopulation would grow by 80,000 per annum (equivalent to 2 percent) duringthe Plan period and that there would be 60,000 new jobs created each year, ofwhich 14,500 would be for salaried employment. The employment projectionwas based on the achievement of the Plan's investment objectives, with anallowance for deaths and retirements estimated at 12 percent of salariedemployment Gver the Plan period. The latter is a somewhat high figure, but inany event should not be included in calculations relating increases in totalemployment to net increases in the labor force.

4. The National Development Plan understates the seriousness of theemployment situation. The Mission estimated the active population to begrowing at 2.5 percent (the total population is growing at 3.1 percent),while employment may be assumed to be growing at approximately the samerate as GDP in real terms. Given the slow growth of GDP in recent years, veryfew of the new entrants to the labor force will have found salaried employ-ment. The Mission's projections for the Plan period (given in Table 1) arebased on optimistic assumptions. Stagnation in agricultural output impliesthat, at best, employment in that sector will grow by no more than 5 percentbetween 1973 and 1977. Value added by the manufacturing sector is projectedto grow by 15 percent during the period 1973-77, and related employment can beassumed to grow similarly. The sharp fall in investment and in constructionbetween 1971 and 1975 implies a comparable drop in employment in the construc-tion sector, and it may be assumed, at best, that the number of jobs inconstruction will recover by 1977 to the level reached at the beginning of thePlan period. There has also been no significant growth in government employ-ment between 1972 and 1974 and projected revenues 1/ will be sufficient onlyfor a very modest real expansion over the next two years. Employment in thehousehold sector has probably declined sharply as a result of the departure ofmany expatriates; the French community, which numbered over 50,000 in 1970,has more than halved. In summary the Mission estimated that the activepopulation is growing by nearly 100,000 per annum, but that there would beonly about 10,000 new jobs created each year during the Plan period, andpossibly another 1,500 vacancies a year would arise as a result of malaga-sization.

1/ Increases in public service salaries will also reduce the financingavailable for hiring new staff.

ANNEX IVPage 3

Table 1: Growth in Salaried Employment 1973-77(in thousands)

Urban Rural Total

Malagasization 6 - 6

Agriculture - 7 7Industry 10 5 15Construction - - _Administration 4 3 7Household Services - - -

Other Services 8 2 10

Total 28 17 45

Increase in Active Population 170 230 400Incremental Salaried Employment (%) 16 7 11


5. For manpower planning purposes it is important to have a longerterm horizon. During the next ten years the active population will growby over one million. Even if an average rate of real growth of GDP of 5percent were achieved and, assuming the Government adopted an active employ-ment policy, there are still not likely to be more than 300,000 new salariedjobs by 1985. Thus seven out of ten entrants to the labor force must seektheir livelihoods in the informal or rural sectors. The Government's reformof the educational system with its emphasis on basic education as a terminalcourse recognizes this situation.

B. EDUCATIONAL REFORM

6. President Ratsiraka's Charter of the Malagasy Socialist Revolutionplaces great stress on the educational system for the mobilization of youth fordevelopment. The reform of the educational system is based on three mainprinciples: "democratization, decentralization and malagasization." Thefirst aims at giving a basic education to all with an equal chance of con-tinuing education thereafter; the second recognizes that educational controland the provision of facilities have been overcentralized in Tananarive; thethird seeks to achieve harmony between educational content and the principlesof the revolution and, in particular, lays stress on the development ofeducation in the local Malagasy dialect.

7. The Charter calls for the complete enrollment of children ofprimary school age within three years; the new classrooms are to be built bythe fokonolona, and national servicemen are to be trained as teachers.Over a longer period an academic center, a technical secondary school and auniversity center are to be established in the capital of each region. Thecurricula are to be malagasized and made relevant to the conditions in eachregion. In the longer term the possibility of private schools being takenover by the State will be studied.

ANNEX IVPage 4

Structure of the Educational System

8. The present system comprises a six-year primary course beginning atage six; however, many small schools in the rural areas only offer a four-yearcourse. Lower secondary educatior. lasts four years and upper secondary three.Higher education courses last from two to six years. Under the reform, pri-mary education would last five yeax; lower secondary education four yearsand upper secondary education, three years. Higher education courses wouldprobably comprise three modules of two years each. The planning for thesechanges is at a very earlv stage, but a new five-year primary curriculum hasbeen developed.

9. A major problem at all levels is that the instruction given ismainly a preparation for the next higher level. This is particularly truein the primary schools, where the emphasis is on preparation for lowersecondary education. Because the latter is given in French, the primaryschool curriculum has been generally over-literary, with the result that thelocal language and scientific and practical subjects with a regional orienta-tion have been neglected. This bias has occurred even in the small primaryschools in rural areas where pupils have a minimal chance of entering secon-dary school. They have consequently received an education which has alienatedthem from village life without giving them in any way the means to earn alivelihood in the urban areas to which they tend to migrate. As a result someparents are loath to send their children to school.

10. Another major problem confronting the educational system is thatof administration and management. This problem has two aspects: first, andmost important, the shortage of experienced personnel; and second, an over-centralization of decision-making in Tananarive. The first is a naturalresult of the sudden departure of French admistrators combined with insuffi-cient training of Malagasy replacements. This problem should steadilyresolve itself as Malagasy personnel gain experience, provided there ismore stability in staffing; the present turnover of staff in the Ministry ofEducation is too high for effective administration. Improved methods forthe collection and analysis of educational and financial statistics wouldenable the planning unit of the Ministry of Education to function more ef-fectively.

11. The overcentralization of decision-making in Tananarive is suchthat the appointment of every primary school teacher has to be approvedby the central ministry; where secondary school teachers are concerned,not only do the central authorities decide on appointments, but also on theindividual school to which the teacher will be assigned. The withholding ofdecision-making powers from local authorities has made it impossible to adaptnational policies to local conditions and has led to a lack of communicationand coordination with other services at the local level.

ANNEX IVPage 5

12. There are also regional inequalities in the system. For example, atthe primary level, Tulear province, with 15 percent of the population, hasonly 9 percent of primary school enrollment. At the secondary level all the

other provinces are penalized to the benefit of Tananarive. In particular at

the upper secondary level, which leads on to university, Tananarive province

with only a quarter of the population, provides half the enrollment. Greatdifferences within regions also exist; it is very difficult for children fromsmall rural schools to obtain secondary school places.

Table 2: Provincial Population and Education Indicators, 1974(Figures in %)

Public Primary Public General SecondaryProvince Population Enrollments Teachers Enrollments Teachers

Diego-Suarez 8 9 8 6 6

Fianarantsoa 24 24 24 17 15

Majunga 12 12 14 10 8Tananarive 25 26 25 41 47

Tamatave 16 19 17 13 11

Tulear 15 9 11 14 13

MADAGASCAR 100 100 100 100 100

Source: Ministry of National Education.

Primary Education

13. Primary education enrollment totaled just over a million in 1974;after increasing by 6 percent annually from 1968 to 1972, it has remained

substantially constant during the last two years. For the country as a

whole, only about 50 percent of primary school age children attend school.About 20 percent of the enrollment is in private schools. One of the main

problems in public schools is the high average number of pupils per teacher

(nearly 75:1). In private schools, it is a more reasonable 40:1. Despite theneed for additional teachers, the teacher training colleges have been far fromfully utilized in recent years because the Government lacked the funds for the

expansion of its teaching force. Owing to the high pupil/teacher ratio and

the scarcity of basic teaching materials, primary school standards are general-ly very low, providing the educational system with a very weak base. Aboutone fifth of primary schools students repeat grades and nearly a fourth dropout each year. Thus the system is very inefficient; the ratio between theactual number of pupil-years to obtain a primary leaving certificate and the

number of years theoretically necessary is about three to one.

ANNEX IVPage 6

Table 3: Average Promotion, Repeater and Dropout Rates 1972-1974(As % of Grade Enrollments)

Grade Promotion Rate Repeater Rate Dropout Rate

1 (100) 29 25

2 46 17 19

3 65 16 21

4 63 19 295 52 12 14

6 74 24 31

(7) 44

Average 57 20 23

Source: Ministry of Education.

14. With the objective of achieving universal primary education asrapidly as possible, the Charter calls for an additional million pupils to be

enrolled by 1979, which would result in a total enrollment of two million.

This implies that between a fifth and a quarter of the population would be

attending primary school, an exceptionally high figure, which would place an

almost impossible strain on the country's financial and trained manpower

resources. Yet, since the basic primary education program is to last five

years (rather than six as at present), repetition is to be discontinued

and over-age pupils are to be gradually phased out, universal education would

be achieved with a lower number enrolled. The underlying objectives of the

Charter would be largely fulfilled if this target for enrollment were set at1.5 million by 1979, in which case greater emphasis could be given to the

quality of education.

15. Unemployed youths with a lower secondary school certificate

(CFEPCES), enrolled as national servicemen, are to be used as teachers. Over

the next two years the Government proposes to give 18,000 servicemen a crash

three-month teacher training course. They would receive only one third of the

pay of regular teachers and would be engaged for a minimum of two years. It

is envisaged that the village fokonolona would contribute to the servicemen's

salaries with a greater or lesser participation by the Government depending

on the resources of the fokonolona. The serviceman would generally teach

in his home area, so that he would have the advantage of familiarity with

the local dialect, customs and conditions. This imaginative scheme offers

a partial solution to the financial cost of the primary education plan.However, much has to be done to translate the idea into an effective pro-

gram, and it is likely that the size and phasing of the scheme will need

to be reviewed. Further consideration must also be given to procedures

for assessing and administering the financial contributions of the fokono-

lona.

16. The curriculum is to be standardized at five years and tailored to

national and regional conditions with the help of new academic provincial

centers which will be made responsible for educational development. Mialagasy

ANNEX IVPage 7

will become the main medium of instruction, and a large part of the coursesor practical training sessions will be devoted to preparing children toparticipate more effectively in the development of their region or villages.The broad outlines of the courses have already been elaborated in some detailduring a series of seminars held throughout the country; the new curriculumwill be introduced from 1976 onwards. The regional variations are nowexpected to be less important than was formerly envisaged.

17. After primary school, the pupils would either go on to secondaryschool or join a one-year vocational school which would prepare them forimmediate participation in the economic activity of their region. Thereare however no plans at present regarding the form these practical trainingunits will take. It is planned that 40 percent of primary school leaverswould enter secondary education; but if this percentage (actually belowtoday's 45 pecent) were to be applied to the much larger primary school outputimplied by the above plans, secondary school enrollment would increase tolevels which the economy could not support.

General Secondary Education

18. Lower secondary education given in the "colleges d'enseignementgeneral" and in the "lyce'es" leads after four years to the lower secondarycertificate (CFEPCES). Upper secondary education is given only in the "lycees"and lasts three more years, leading to the "baccalaureat". Total enrollmentin both cycles of the general secondary education has increased by about 30percent since 1970. The 1974 enrollment totaled about 115,000 (of which about20,000 were in the upper cycle). Nearly half the pupils attended schools inTananarive. About 50 percent of secondary enrollments are in private schools.Efforts are now being made to "stabilize" public secondary school enrollments,starting at the lower level. Over 400 foreign teachers are employed, in partsupplied under technical assistance programs. Student/teacher ratios arereasonable, except in the upper cycle public schools, where it is overgenerous(19:1) because of the existence of many uneconomically small classes. This inturn is caused by the multiplicity of different courses.

19. The overall internal efficiency of the general secondary educationsystem is low. Only 146 out of 1,000 students entering the first gradecomplete the full secondary course. Many fail their examinations; thus manyof those categorized as primary certificate holders have in fact spent severalyears in secondary education and many lower secondary certificate holdershave spent several years in a "lycte".

20. The efficiency and quality of education is better in the freepublic secondary schools, access to which is controlled by examination, thanin the private schools. These free public "lycees" are still mostly filledby the children of the richer, more educated urban middle class. The

ANNEX IVPage 8

Government is not in a position to impose higher standards of quality inthe private schools in the present situation, since its total subsidiesto them have been gradually reduced, amounting to a mere FMG 250 million in1974.

Technical and Agricultural Secondary Education

21. Technical education has had difficulty attracting well motivatedcandidates. Total enrollment (8,000 in 1974) is still only about 7 percentof general secondary enrollment despite repeated promotion campaigns andthe institution of an entrance examination common to technical and generalsecondary education. To increase the attractiveness and quality of technicaleducation, the Government plans to establish bridges between the differentlevels of technical education and between general secondary and technicaleducation. Students are also to be more thoroughly prepared for self-employ-ment. However, there are several basic problems yet to be confronted, namely:(i) the serious lack of experienced teachers; (ii) the lack of equipment forpractical training; (iii) the excessive number of specializations leading tosmall classes and high equipment costs per pupil; and (iv) the difficultyexperienced by graduates in competing with experienced workers, given theirlack of practical training relative to the higher salary level attachedto their educational attainment. Graduates of the agricultural schoolsface similar problems in finding jobs. Only about 40 a year are currentlytaken on by the public sector, leaving about 300 with no alternative otherthan the temporary solution of national service.

Higher Education

22. Higher education has experienced a dramatic growth in recent years.Although the present facilities were planned for 6,000, about 9,000 wereenrolled in 1975 as compared to 5,600 in 1972. However, with the introduc-tion of the French system of credit (unites de valeur), effective totalenrollment is hard to estimate. About 50 percent of the students are study-ing economics, management, law and sociology; 15 percent sciences; 16 percentliberal arts; but only 3 percent agronomy and 7 percent engineering. Thecourses are generally based on curricula devised in France; a major effortis required to reorient the programs to meet local requirements. The Govern-ment has no detailed plans for the decentralization of the University, butas a first step towards establishing a university center in each provincethe Charter calls for the completion of the Polytechnic at Diego Suarez andan expansion of the Tulear campus. The Charter also mentions the introduc-tion of procedures for channeling students into priority areas of study, tobe accompanied by a revamped scholarship system. Such measures are ofcritical importance in raising the external efficiency of higher education.

Non-formal Education

23. Four Ministries, several public and more than one hundred privateorganizations are involved in non-formal education programs. Their efforts

ANNEX IVPage 9

are not effectively coordinated and many undertakings are exceedingly costly,given their limited scope and impact on participants. Among the more success-ful programs are those run by the Institut de Promotion-Formation (INPF) whichprovide management training and assistance to owners/managers of small busi-nesses and to middle managers of larger industrial enterprises. 1/

Expenditure on Education

24. Education's share of the total recurrent budget has risen steadilyand the implementation of the Government's plans with regard to primary, techni-cal and higher education will further increase the burden. The most recentdata on private education relate to 1972, when private expenditures amountedto FMG 5 billion. In the same year external aid to education amounted toFMG 7 billion; thus total expenditure on education amounted to about 7.5percent of GDP. The dramatic expansion of general secondary and highereducation has been financed in part at the expense of primary education. Thisis evidenced by the relative stagnation of primary education enrollment since1972.

Table 4: Public Expenditure on Education

% of recurrentFMG budget

(billions) expenditures % of GDP

1960 2.7 12.5 2.01965 5.1 17.0 3.11970 8.0 19.7 3.21975 11.0 /a 21.5 3.21976 15.5 /b 24.8 4.0 /a

/a Provisional figure.

/b Budget estimate.

Source: Ministry of Finance

1/ See Annex II, Section D.

ANNEX IVPage 10

25. In 1974 the annual costs per pupil at different levels were asfollows:

FMG

Primary 7,000Lower secondary 20,000Upper secondary 80,000Technical over 100,000Higher over 450,000

The low cost of primary education is the result of permitting a very highpupil/teacher ratio and allocating virtually no funds for maintenance orteaching aids. Primary schools lack the simplest materials such as booksor pencils, and 96 percent of expenditures go to meet teachers' salaries.Secondary schools, too, lack much essential equipment: 90 percent of recurrentcosts are accounted for by teachers' salaries; 85 percent in technical andvocational schools.

C. EDUCATED MANPOWER NEEDS

26. In a situation of acute budgetary constraints it is particularlyimportant to ensure that the educational system produces the numbers andtypes of skilled manpower required by the economy. In the absence ofreliable data, it is difficult to evaluate the external efficiency of theeducational system. Nevertheless, it is possible to obtain some indicationof the situation by matching the approximate figures available for the growthin employment with projections of the output of the schools for the period1973-77 by using ratios of "educated manpower" 1/ to total employmentderived by the ILO as follows:

Percentage of employees holding atSector least a primary school certificate

Industry and construction 10Other services 35Government, administration 65

1/ Defined as persons with primary education or above.

ANNEX IVPage 11

If employment projections given in the National Development Plan 1974-77 areused, the demand for "educated manpower," calculated on a similar basis,would total 51,800.

Table 5: EDUCATED MANPOWER NEEDS, 1973-77(in thousands)

Mission/ILO Plan/ILOEstimate Estimate

New Employment

Industry and construction 1.5 3.7Administration 4.6 8.5Other services 3.5 16.6

Malagasization

Administration 1.0 1.0Other sectors 5.0 5.0

Death and Retirement

Administration 4.7 5.2Other sectors 4.0 11.8

TOTAL 24.3 51.8

27. Thus, even on optimistic assumptions, the economy will requireannually on average over the Plan period no more than 13,000 workers withprimary education or better to fill vacancies or new jobs, whereas the esti-mated output of the university and of the secondary and technical schoolsalone is currently 17,500. 1/ In addition approximately 37,000 complete thefull six years of primary education each year but do not proceed to furthereducation. Evidently far more youths are being given an academic educationthan can be absorbed by the economy.

28. With existing trends over the next ten years, it is estimated that300,000 new salaried jobs will be created (see Section A above), of whom notmore than one third would require a primary school certificate or better. Inaddition, it may be assumed that replacement of existing skilled manpowerwould enable another 50,000 "educated" persons to find salaried employment,and, at most, a comparable number might be absorbed by the informal sector.

1/ Defined as all persons leaving secondary school or university regardlessof whether they obtained any diploma or certificate.

ANNEX IVPage 12

Thus, there will be a maximum requirement for an average of about 20,000"educated" entrants to the labor force each year. This implies that theeconomy's needs for "educated manpower" would be satisfied without any furtherexpansion in post-primary education. It does not mean, however, that thestructure of the system is correct.

29. Already 10,000 lower secondary certificate (CFEPCES) holders arereported to be unemployed. While probably more than half of these studentsattended private schools and their education did not represent adirect burden on government resources, the presence of a growing numberof unemployed 1/ young people has a high social and economic cost. Theproblem is compounded by the fact that salaries are often linked to education-al qualifications and employers can find experienced workers without formalqualifications, but capable of doing the job, who are ready to work for a muchlower salary than the "qualified" school leavers. At the upper levels ofgeneral education as well as in technical and higher education, the surplusproblem is likely to be less acute in terms of absolute numbers, as enroll-ment is much smaller. However, the unit costs at these levels are so highthat any overproduction is very wasteful of resources.

30. The explanation for this explosive situation lies in a strongdemand for education, resulting from the perceived differences between rural/urban and skilled/unskilled labor incomes. The high level of governmentsalaries, in particular, explains much of the demand for general education. 2/The situation is exacerbated by the absence of an education developmentstrategy and related employment and wages policies based on realistic projec-tions of long term manpower needs. In the absence of reliable manpowerstatistics and educational output projections, manpower planning is impos-sible.

D. MANPOWER AND EMPLOYMENT PLANNING

31. In the National Development Plan employment is mentioned largely asa by-product of investment and production objectives. The Charter by contrastclearly makes the provision of employment a central objective. The urgenttask now is to create the means for achieving this objective by establishing amore efficient employment planning machinery. This would call for:

(i) setting up a strong policy-making body for the designof employment and manpower plans which would signalthe new priority of employment objectives and be in

1/ Or employed in jobs not requiring the level of education they attained.

2/ Some data on income differentials are given in Table 6.

ANNEX IVPage 13

TABLE 6: INCOME DISTRIBUTION: SOME DATA

A. Average annual income per employee and per sector? 1972

Administration FMG 413,000 Scale 1,300Services 274,000 880Industry 196,000 630Household aides 63,000 200Agriculture 31,000 100

Source: Compiled from National Development Plan 1974-77.

B. Minimum salaries, as of March, 1974

Minimum index Maximum indexpoints 1/ points I/

Manual workers 2/

Unskilled 150 170Semi-skilled 180 200Skilled 220 350Foremen, supervisors 360 900

Clerical and sales workers

Basic literacy, untrained 150 200Short on-the-job training 220 290Clerk, typist 300 415Specialized clerical worker 425 650Highly qualified office

personnel 700 1,200

Source: Journal Officiel - March 1, 1974

1/ One index point equals FMG 0.34 per hour in zone 1 (Tananarive)Tamatave, Diego-Suarez and two smaller towns).

2/ Non-agricultural salaried employment only.

See also Annex V, Table 9.7

ANNEX IVPage 14

a position to influence and coordinate the employmentpolicies pursued by the ministries; and

(ii) revamping the inadequate statistical and informationalapparatus.

32. The Ministry of Labor is at present the main institution involvedin the formulation and implementation of policies concerning employment, thewage structure, working conditions and vocational training. The Directorateof Planning has a Human Resources Section which has been hampered by a lackof both experienced staff and statistical data.

33. The Ministry of Labor thus is the most important element in thepresent institutional setting. Its departments include the usual legal,medical and social security, labor inspection and labor exchange services.The two departments most directly connected with employment policies arethe statistical department and the Central Employment Service. The statisticaldepartment is small, understaffed and has no budget of its own to undertakethe surveys it deems necessary. The Central Employment Service is, in prin-ciple, the department which should promote employment and invite other deci-sion-makers to consider the various employment objectives. A represen-tative of the department sits on different inter-ministerial committees--forinstance on the Investment Committee, a committee composed of representativesof different ministries which approves agreements made under the InvestmentCode. The voice of the representative is, nevertheless, only one amongmany and, moreover, there are no real ways in which investors' compliancewith employment objectives can be efficiently monitored. In general, theCentral Employment Service does not seem to be in a position to voice strongopinions regarding employment plans and objectives, let alone formulate anintegrated employment and manpower plan. The Ministry of Labor's relativeshare in the budget has been diminishing and it continues to suffer fromunderstaffing. Consequently, the Ministry and in particular its CentralEmployment Service, has not been able to promote employment effectively andformulate the urgently needed policies.

34. To undertake the task of designing global and sectoral employmentplans and to coordinatethe related policy measures, considerationmight be given to establishing a powerful National Committee for HumanResources with strong Presidential backing, to be supported by a strengthenedHuman Resources Section at the Directorate of Planning which would act assecretariat for the National Committee.

35. If this Committee were given sufficient broad terms of reference, itcould ensure that:

(i) education and training programs are closely linked to theeconomy's requirements for different types of skilledmanpower;

ANNEX IVPage 15

(ii) the scholarship programs channel students to the differentareas of study according to the economy's requirements fordifferent types of skilled manpower;

(iii) investments, both public and private, are designed so as tomaximize employment opportunities to the extent consistentwith viability;

(iv) a wages policy is adopted which maximizes employment.

E. EMPLOYMENT AND INCOME POLICIES

36. It was concluded above that the bulk of the new entrants to thelabor force over the next 10-20 years will have to be absorbed within theagricultural sector. This suggests that priority should be given to ruraldevelopment projects that have the greatest impact on employment, implyinga preference for programs that encourage spontaneous settlement (rather than,for example, large capital-intensive irrigation schemes). This in turn sug-gests the building of new rural roads, opening up of new areas, the completionand repair of small irrigation schemes ("petits perimetres"), improved suppliesof agricultural equipment and inputs and increased agricultural credit forsmall farmers (see Annex I). There would appear to be significant potentialfor non-farm rural employment in agro-industries (e.g., establishing small oilpresses), farm supply activities, the small-scale manufacture and repair offarm tools and equipment (e.g., workshops such as those established in connec-tion with the Androy project) and through the construction of rural infra-structure, using labor-intensive techniques. There have already been someinteresting attempts to mount labor-intensive public works programs; theseefforts could be intensified.

37. Lastly, mention must be made of the importance of formulating awell-defined national incomes policy. The Charter calls for "the suppres-sion of social inequalities" and a "just distribution of wealth." There arelarge differentials between the salaries of workers with different levels ofskill, but the difference in living standards between those in salariedemployment in the urban areas and those living in rural areas is also verygreat. If salary differentials are reduced by raising the wages of the low-est paid, there will be two adverse results. First, the gap between ruraland urban incomes is widened and, second, labor-saving measures are encour-aged. There is ample evidence from other developing countries that, as mini-mum wages are raised, employment falls. It is therefore preferable to reduceincome differentials by increasing the incidence of tax on the higher incomegroups, rather than by raising the minimum wage levels. The differentialbetween rural and urban incomes can best be tackled by raising farm pricesfor agricultural products.

ANNEX IVPage 16

F. MANPOWER STATISTICS

38. There is a variety of sources of statistical data on manpowerand employment in Madagascar, the main ones being the statistical departmentof the Ministry of Labor, the National Provident Fund (CNAPS), the NationalInstitute for Statistics and Economic Research (INSRE) and the Ministry ofFinance. Most of the statistical material produced, however, suffers fromserious shortcomings, the most typical being: (i) limited coverage, generallyrestricted to a part of the modern sector, (ii) inadequate procedures andforms for the collection of information, (iii) deficient compilation work, and(iv) inadequate updating of existing files. The data are therefore mostlyunreliable and incomplete. Where accurate data do exist, they are largelyirrelevant for manpower and employment planning.

39. The major source is CNAPS, whose files cover 16,000 employers.As 6,000 of them are employers of household aides, CNAPS covers only 10,000out of approximately 40,000 employers in the modern sector. CNAPS derivesits statistical information from three types of forms, namely the hiringand lay-off notice, the employer registration form, and the quarterly declara-tion of salaries. In theory, the second and third documents could provideindications concerning the branch of activity, localization and total numberof employees of the business where a given employee works. The first formcould give the sex, age, nationality, occupation and qualification level ofthe employee.

40. There are, however, several serious drawbacks in using data com-piled from these forms:

(i) The coverage of CNAPS has changed over time; thus, isit impossible to determine to what extent an increase inthe employment figure of a given sector is due to improvedcoverage.

(ii) Certain data, like "qualification" and "branch of activity",are often incorrectly recorded or not specified at all;this does not greatly concern CNAPS because it does notitself use such information.

(iii) The CNAPS system cannot, unless changed, yield anykind of information on educational levels, salary leveland hours worked, or on productivity and under-employ-ment. Unemployment data are, of course, impossible tocompile as long as there are no unemployment benefitsdistributed by CNAPS.

(iv) The compilation work at CNAPS is deficient and theclassifications used are frequently inadequate; forinstance, no distinction is made between seasonal andpermanent salaried employees.

ANNEX IVPage 17

41. Because the CNAPS material focuses on data pertaining to its ownactivities, the Ministry of Labor has launched its own separate effort with its"fiches de renseignement periodiques". This effort has largely failed on twogrounds:

(i) The forms are often inadequately filled out, both because ofacknowledged imperfections in their design and because theLabor Inspectors who are required to control the processhave an excessive workload.

(ii) Although the forms yield some additional information on thesalary level and distinguish between permanent andseasonal employees at the start, they overlap largelywith the CNAPS forms.

Data collected by the Labor Offices on registered unemployed, officiallyannounced layouts and unfilled job offers are very incomplete.

42. INSRE has the most extensive information files concerning employ-ment in the private sector. Unfortunately they have not been kept up-to-date,and now many of the businesses on file have ceased to exist. On the publicsector side, INSRE has the best information on government employees, butstill only about half are covered by the system. The Ministry responsiblefor the Civil Service also has files on government emolovees. but the coverageis incomplete. As a minimum for the efficient administration of the publicservice there is need to establish a system capable of producing detailedup-to-date statistics with comprehensive coverage of government employees.

43. The existing statistics available at present on manpower and employ-ment are thus most inadequate. Not only is it difficult to design global andsectoral employment policies in the absence of basic data, but also the for-mulation of education plans and the tackling of income distributional andwage policy issues becomes virtually impossible.

44. In order to improve this situation, two types of action may beenvisaged: (i) transforming the present system of sources into a simpleand effective permanent data collection and processing system; (ii) followingup on recent population census with one or more manpower studies or samplesurveys. These strategies are not mutually exclusive; the first seems,however, more difficult to implement.

45. The most cost-effective way to organize a reliable permanent datacollection and processing system would be to change the CNAPS forms and com-pilation procedures. 1/ The alternative would be to reorganize INSRE'sprocedures and files; this would be much more expensive and to some extentduplicative. Also, CNAPS might well extend its operations to the ruralsector in the future, thus considerably increasing its coverage of theeconomy.

1/ Such a system has been set up in several countries, notably Cameroon.

ANNEX IVPage 18

46. Any effort to change the CNAPS forms and compilation system wouldhave to be preceded by extensive discussions between the main users (CNAPS,Labor, Finance and Plan, Education, INSRE) regarding appropriate and work-able forms, frequency and enforcement of collection, classification andfinally service charges to be billed by CNAPS. This will take some time.To meet immediate needs for data for manpower planning, one or more surveyscould be undertaken, using the census data for sampling purposes. It is notyet clear to what extent the census will contribute data on employment inMIadagascar. The questionnaires used seem to leave room for inaccuratedescriptions of activities and occupations. Under-employment and even un-employment would in many instances appear under self-employment, as wouldmany housewives and children over ten years of age. The census should never-theless constitute a sound base for further manpower surveys.

47. The Government has under consideration a large-scale manpower survey.The proposal is that a 10 percent sample would be drawn from both the urbarand rural labor force, i.e., about 400,000 people. The costs seem pro-hibitively high (of the order of $1,000,000) and the classification retainedis exceedingly complicated. Such a survey appears not only unmanageable andoverly expensive, but it fails to approach the various sectors (rural, in-formal, modern) in the way most appropriate to each.

48. In the modern sector, a more focused and flexible approach wouldyield better results, and be less costly. it could include: (i) a series oflimited but well-designed surveys concerning key sectors (like commerce,transportation) or key groups (e.g., the unemployed lower secondary educationgraduates, technical or agricultural education graduates, small employers,etc.). Such surveys could aim at a thorough qualitative evaluation, ratherthan being merely quantitative studies; (ii) for larger enterprises attentioncould be focused on key topics (skilled manpower needs or management training,for instance) through questions directly addressed to management in a sampleof the 100 largest enterprises.

49. In the informal sector, it is difficult to carry out a globalsurvey. Some major questions such as those touching education and vocationaltraining needs cannot be properly answered by the means of a purely statisticalapproach. In agriculture it might by more useful to tackle questions likeemployment effects or training needs by studying specific projects or projectareas where those questions have arisen or will arise. Such studies couldset the stage for a rural employment plan by comparing different agricul-tural development schemes on the basis of costs-benefits, employment andmanpower training needs and input-output coefficients. Small-scale industryand other non-agricultural activities in the informal sector could alsobe approached by focused surveys of limited scope aiming primarily at thequalitative information needed to design the kind of support programs recom-mended in Annex II.

ANNEX V

STATISTICAL TABLES

Note: For conversions from Malagasy Francs (FMG) into U.S. Dollars andvice versa, the following exchange rates have been used:

1970 1971 1972 1973 1974 1975

FMG/U.S.$annual average: 277.71 277.03 252.21 222.70 240.50 214.32end of year 277.71 255.79 255.79 230.21 222.22 224.27

ANNEX V

LIST OF TABLES

I. Population and Employment1.1 Population 1960-1975 (total & urban)1.2 Population by sex and age, 1970 and 19751.3 Economically active population by age and sex, 1970 and 19751.4 Economically active population by major sectors, 1970 and 19751.5 Registered unemployment, 1969-1975 (by province)1.6 Demographic and social statistics (preliminary census results,

1975)

II. National Accounts2.1 Gross domestic product by industrial origin, 1970-1975 (in

current prices)2.2 Gross domestic product by industrial origin, 1970-1975 (in

constant 1970 prices)2.3 Gross domestic product by expenditure, 1970-1975 (in current

prices)2.4 Gross domestic product by expenditure, 1970-1975 (in constant

1970 prices)2.5 Investment and saving, 1970-1975 (in current prices)2.6 Gross domestic income (GDY), 1970-1975 (in constant 1970 prices)2.7 Resource gap, 1970-1975 (in constant 1970 prices)

III. Balance of Payments and External Tradea) Balance of Payments3.1 Balance of payments - summary, 1970-1974 (US$)3.2 Balance of payments - summary, 1970-1974 (FMG)3.3 Balance of payments - current account, 1970-1974 (FMG)3.4 Balance of payments - capital movements and reserves, 1970-1974 (FMG)

b) External Financial Flows3.5 Financial flows from and to DAC member countries and multilateral

organizations, 1970-1974 (summary)3.6 Bilateral official financial flows from and to DAC member countries,

1970-1974 (details)3.7 Financial flows from and to multilateral organizations, 1970-1974

(details)3.8 Private financial flows (net) from and to DAC member countries,

1970-1974 (details)

c) External Trade3.9 Merchandise exports 1960-1974: value f.o.b.3.10 Merchandise exports 1960-1974: percentage composition by value3.11 Merchandise exports 1960-1974: quantities3.12 Merchandise imports 1970-1974: value c.i.f.3.13 Merchandise imports 1970-1974: percentage composition by value3.14 Imports of food, beverages and related products, 1970-1974

(value c.i.f.)3.15 Imports of food, beverages and related products, 1970-1974 (quantities)

ANNEX V

3.16 Price and quantum indices for food imports, 1970-19743.17 Imports of mineral fuels, lubricants, and related materials,

1970-19743.18 Exports of mineral fuels, lubricants, and related materials,

1970-19743.19 Imports of capital goods, 1970-19743.20 Direction of trade 1960-1974: exports3.21 Direction of trade 1960-1974: imports3.22 Realized export prices for selected products, 1960-19743.23 Export price indices for selected products and product groups,

1970-19753.24 Foreign trade indices, 1970-1975

IV. External Public Debt4.1 External public debt outstanding, 1965-1975, by source4.2 External public debt: disbursements 1965-19754.3 Service payments on external public debt, 1965-19764.4 Foreign aid commitments, 1973-1975

V. Public Finance5.1 Central government current revenues and expenditures, 1970-19755.2 Central government capital expenditures, 1973-19755.3 Financial operations of the treasury, 1971-19755.4 Financial situation of the marketing bureaus and stabilization

funds, 1970-19755.5 Receipts and expenditures of the three social security schemes,

1972-1975

VI. Money and Banking6.1 Monetary survey, 1970-19756.2 Distribution of credit to the private and parastatal sectors by

economic activity, 1970-1975 (amounts outstanding)6.3 Distribution of credit to the private and parastatal sectors by

economic activity, 1970-1975 (percentage distribution)6.4 Interest rate structure6.5 International liquidity, 1970-1976

VII. Agriculture7.1 Crop production 1964-1975, and National Development Plan

targets for 19777.2 Salt water fishing: marketed catch, 1970-19747.3 Agricultural gross output, 1970-1975--by commodity groups and

major commodities (in constant 1970 prices)7.4 Agricultural gross output, 1970-1975--by commodity groups and

major commodities (in current prices)7.5 Agricultural producer prices, 1966-19757.6 Imports of inputs for agriculture, 1970-1974 (values and

quantities)

ANNEX V

VIII. Other Sectorsa) Industry8.1 Industrial production, 1970-1976 (quantities)8.2 Mineral production 1970-1975 (quantities)8.3 Electricity production and consumption, 1960-19758.4 Industrial production indices, 1970-1975

b) Transport8-.5 Selected indicators of rail transport, 1960-19758.6 Air transport 1960-19758.7 Volume of maritime freight traffic by port, 1960-19748.8 Selected indicators of motor vehicle traffic, 1965-19748.9 Registration of motor vehicles, 1960-1975

c) Social Services8.10 Educational enrollments, 1966-19748.11 Hospital beds and physicians, 1972 (by province)

IX. Prices and Wages9.1 Cost-of-living indices in Tananarive, 1960-1976 (annual averages)9.2 Cost-of-living indices in Tananarive, 1974-1976 (monthly averages)9.3 Retail prices for selected commodities in Tananarive, 1970-19769.4 Wholesale prices for selected commodities in Tananarive, 1970-19769.5 Selected price indices, 1970-1975 (summary)9.6 Implicit national accounts deflators, 1970-19759.7 Industrial minimum wages, 1974-1978

Table 1.1: POPULATION 1960-1976

of which:

Year Total Population Male Female Urban Population(midyear, in '000) (in % of total) (in '000) (in % of total)

1960 5,870 49.2 50.8 610 10.41961 6,020 635 10.51962 6,170 665 10.81963 6,325 700 11.11964 6,485 740 11.4

1965 6,650 49.2 50.8 785 11.81966 6,820 830 12.21967 7,000 880 12.61968 7,190 935 13.01969 7,390 990 13.4

1970 7,600 49.3 50.7 1,045 13.81971 7,820 1,100 14.11972 8,050 1,150 14.31973 8,300 1,190 14.31974 8,560 1,235 14.4

1975 8,835 49.5 50.5 1,285 14.51976 9,110 1,340 14.7

Source: Mission estimates, based on information provided by INSRE.

Table 1.2: POPULATION BY SEX AND AGE, 1970 AND 1975

(in percent of total population)

1970 1975

Age Male Female Total Male Female Total

0-4 9.3 9.1 18.4 9.4 9.2 18.6

5-9 7.5 7.4 14.9 7.5 7.4 15.9

10-14 6.4 6.4 12.8 6.4 6.4 12.8

15-19 5.3 5.3 10.6 5.5 5.5 11.0

20-24 3.9 4.0 7.9 4.4 4.4 8.8

25-29 3.1 3.2 6.3 3.2 3.3 6.5

30-34 2.6 2.8 5.4 2.6 2.7 5.3

35-39 2.3 2.5 4.8 2.2 2.3 4.5

40-44 2.0 2.1 4.1 1.9 2.0 3.9

45-49 1.7 1.9 3.6 1.6 1.7 3.3

50-54 1.4 1.5 2.9 1.3 1.4 2.7

55-59 1.2 1.4 2.6 1.1 1.2 2.3

60-64 0.9 1.1 2.0 0.8 1.1 1.9

65-69 0.6 0.8 1.4 0.6 0.8 1.4

70 and over 1.1 1.2 2.3 1.0 1.1 2.1

Total 49.3 50.7 100.0 49.5 50.5 100.0


Table 1.3: ECONOMICALLY ACTIVE POPULATION BY AGE AND SEX,1970 AND 1975

Activity Rates Active PopulationAge (in % of age group) (in thousands)

Male Female Male Female Total

1970: 0-9 _ _ _ _ _10-14 46.3 40.8 225.2 198.h 423.615-19 78.0 60.7 314.2 244.4 558.620-24 96.0 83.7 284.4 25h.4 538.825-44 98.8 79.7 750.7 6h1.9 1,392.645-54 98.7 82.6 232.5 213.4 445.955-64 9h.3 75.8 150.4 144.0 294.465 & over 82.8 46.2 106.9 70.3 177.2

Total 2,064.3 1.766.8 3.831.1

(Global activity rates) (55.1%) (45.9%) (50.4%)

1975t 0-9 - _ _ _10-14 U4.1 39.5 249.3 223.3 472.615-19 76.4 59.2 371.2 287.6 658.820-2h 95.4 81.8 370.8 317.9 688.725-14 98.7 78.3 863.1 712.4 1,575.5h5-54 98.6 81.3 252.2 222.6 474.855-64 93.9 75.1 157.6 152.6 310.265 & over 81.7 45.4 76.2 191.7

Total 2.379.7 1.992.6 4.372.3

(Global activity rates) (54.4%) (44.7%) (49.5%)

Source: ILO, Rapport au Gouvernement de la Republique Malagasy sur les Problemes de 1'Emploi (Geneva,1972), p. 172, for activity rates by age group.--Mission estimates for population by sex and age; see Table 1.2.

Table 1.h: ECONOMICALLY ACTIVE POPULATIONBY MAJOR SBCTORS, 1970 AND 1975

1970 1975as % of as % of

'000 total '000 total

Agriculture 3,190 83.3 3,620 82.8

Industry 80 2.1 90 2.1

Handicrafts 135 3.5 160 3.7

Administration 9C 2.3 110 265

Services and other A 335 8.7 390 8.9

Total 3,830 100.0 4,370 100.0

/1 Includes unallocated and urban unemployed.

Source: Mission estimates, based on information obtained from ILO,CNaPS, and INSRE.

Table 1.5: REGISTERED UNEMPLOYMENT, 1969-1975

(By province)

1969 1970 1971 1972 1973 1974 1975

Tananarive 4,914 5,303 6,133 8,293 9,795 6,835 8,298

Fianarantsoa 933 966 1,017 1,224 1,261 785 879

Tamatave 1,107 967 701 1,910 1,606 1,103 1,404

Majunga 417 330 523 615 2,630 3,105 1,703

Tulear 886 602 917 385 1,933 1,135

Diego-Suarez 904 439 276 339 320 429 446Total 9,161 8,607 9,567 12,766 17,545 13,392 (13,500)e

. not available.

e = estimated.

Source: Services Provinciaux du Travail.

Table 1.6: DEMOGRAPHIC AND SOCIAL STATISTICS

(Preliminary Census Results, 1975)

A. Tananarive (City)

Population, total: 440,913of which: living in households 438,828

living in institutions A 2,085

Households 82,288Average size of household 5033

Buildings 58,507Persons per building 7.54

Dwelling units, total 95,205of which: occupied 83,584

vacant 11,621 ( 12.2% of all dwellings)Persons per occupied dwelling 5.28

Households with radio receivers 67,082 ( 81.5% of all households)

Business establishments, total 5,948Industrial & handicraft shops 1,319Commercial establishments 3,421Banks & insurance offices 38Restaurants, snack bars, etc. 1,170

Schools 356Pupils, total 152,780 (-34.7% of total population)

- male 78,897- female 73,883

Teachers 4,763Pupil/teacher ratio 32

Hospitals 6Dispensaries 12Other public health establishments 7Hospital beds, total 2,921

Population per hospital bed 151 /2

Physicians 169Population per physician 2,609 /2

Midwives 187Population per midwife 2,358 /2

(continued)

Table 1.6 (continued)

B. Secondary Urban Centers in Tananarive Province 13

Population, total 37,325

Households 7,209Average size of household 5.18

Dwelling units, total 8,971of which: occupied 7,334

vacant 1,637 ( 18.2% of all dwellings)

Business establishments, total 676Industrial & handicraft shops 253Commercial establishments 291Banks & insurance offices 3Restaurants, snack bars, etc. 129

Schools 53

Hospitals 4Dispensaries 3Other public health establishments 5

Hospital beds, total 258Population per hospital bed 145 /2

Physicians 12Population per physician 3,110 /2

Midwives 12Population per midwife 3,110 /2

Hotels & guesthouses 10Hotel rooms 149

A Boarding schools, convents, military barracks, etc.

/2 These figures may be misleading, as they do not take into account the populationof the surrounding rural areas.

/3 Four secondary urban centers.

Source: Census Bureau, preliminary results of the 1975 census.

Table 2.1: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN, 1970-1975

(in current market prices; in billions of FMG)

/1 ~~/21970 1971 1972 1973 1974- 1975-

Agriculture 73.8 79.6 83.6 98.8 157.2 168.4

Industry 46.0 49.2 52.3 60.2 66.7 70.6Mining & quarrying 1.0 1.1 1.5 1.7 1.9 2.4Manufacturing 32.9 35.2 37.9 44.7 49.8 52.0

of which: Petroleum refining 3.4 3.9 4.4 5.4 5.9 6.4Food industry 11.1 12.0 14.2 16.9 19.6 20.3Textile & leather industry 7.7 8.8 8.6 9.4 12.6 13.8

Electricity & water 2.9 3.2 3.5 3.6 4.1 4.3Construction & public works 9.2 9.7 9.4 10.1 10.9 11.9

Services 82.6 88.1 86.5 91.8 100.0 107.8Transport, storage & communication 17.4 18.6 18.8 21.5 24.6 26.7Trade 33.6 35.5 34.8 36.8 40.3 44.0Banking L insurance 4.1 4.5 4.1 6.0 6.9 7.6Services 3 27.5 29.4 28.9 27.5 28.3 29.5

Public administration & defense 33.7 35.9 37.4 37.3 38.6 39.1

Import duties 13.2 16.4 13.9 11.8 13.2 14.9

Gross domestic product. in market prices 249.4 269.1 273.7 299.8 375.7 400.8I M6 I I.. .1 I I - P ==Em-

Net indirect taxes 32.4 38.2 39.3 33.9 34.8 41.6

Gross domestic product at factor cost 216.9 230.9 234.5 266.0 340.9 359.21, . .. ~~d I I . ' ' I ''. , I ==MONI *

Components may not add to totals due to rounding.

/1 Preliminary.72 Provisional./3 Includes community, social and personal services, as well as business services, domestic services of

households, owner-occupied dwellings and private non-profit institutions serving households.

Source: INSRE, and mission estimates.

Table 2.2: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN, 1970-1975

(in constant market prices of 1970; in billions of FMG)

1970 1971 1972 1973 1974/1 197 /2

Agriculture 73.8 73.5 74.8 76.5 82.3 80.9

Industry 46.0 48.4 49.2 48.2 51.4 51.4Mining & quarrying 1.0 1.0 1.0 1.4 1.4 1.6Manufacturing 32.9 34.4 35.5 34.6 37.5 37.2of which: Petroleum refining 3.4 3.3 3.8 3.9 3.8 4.0

Food industry 11.1 10.3 10.3 9.4 10.1 9.8Textile & leather industry 7.7 9.4 10.4 10.6 13.0 13.7Electricity & water 2.9 3.2 3.5 3.6 3.9 3.8Construction & public works 9.2 9.7 9.3 8.7 8.7 8.9

Services 82.6 88.1 84.7 82.8 83.2 87.4Transport, storage & communication 17.4 18.3 18.2 18.4 19.1 19.7Trade 33.6 36.2 33.9 32.4 31.8 35.9Banking & insurance 4.1 4.4 4.2 5.2 5.4 5.2Services /3 27.5 29.2 28.4 26.7 26.8 26.6

Public administration & defense 33.7 34.4 34.9 33.4 30.0 29.7

Import duties 13.2 15.8 13.0 10.2 8.2 9.0

Gross domestic product, in market prices 249.4 260.0 256.7 251.1 255.1 258.5

Net indirect taxes 32.4 37.4 37.2 28.9 25.5 29.0

Gross domestic product, at factor cost 216.9 222.7 219.5 222.1 229.7 229.5


/1 Preliminary./2 Provisional./3 Includes community, social and personal services, as well as business services, domestic services of

households, owner-occupied dwellings and private non-profit institutions serving households.


Table 2.3: GROSS DOMESTIC PRODUCT BY EXPENDITURE, 1970-1975

(in current market prices; in billions of FMG)

1970 1971 1972 1973 1974 - 1975/2

Final consumption expenditure 213.3 235.6 244.0 264.9 336.6 357.4Private 167.2 183.1 195.7 217.6 281.7 301.2Government 46.1 52.5 48.3 47.3 55.0 56.3

Gross domestic capital formation 38.9 47.4 37.9 53.8 51.6Gross fixed capital formation 36.4 42.7 36.0 40.1 47.0 49.4

Private 22.3 27.8 21.8 23.8 28.5 30.4Government 14.1 14.9 14.2 16.3 18.5 19.0

Increase in stocks 2.5 4.7 1.9 2.5 6.8 2.2

Exports of goods & nonfactor services 56.8 59.4 57.9 54.7 69.4 83.8Goods 40.1 40.7 41.8 44.5 58.0 70.8Nonfactor services 16.6 18.7 16.2 10.2 11.5 13.0

Imports of goods & nonfactor services d.6 7.3 66.1 62.3 84.1 92.0Goods 39.5 49.1 42.4 38.3 58.2 67.1Nonfactor services 20.0 24.3 23.7 24.1 25.9 24.9

Gross domestic prodict, ip market prices 249.4 269.1 273.7 299.8 375.7 400.8

Net indirect taxes 32.4 38.2 39.3 33.9 34.8 41.6Import taxes 13.2 16.4 13.9 11.8 13.2 14.9Other indirect taxes 22.0 22.7 26.0 26.0 28.6 31.3Subsidies 2.7 0.8 0.6 3.9 7.0 4.6

Gross domestic product, 4t factor cost 216.9 2340. 266.0 340.9 359.2

Net factor income from abroad -10.3 -10.8 -10.1 -6.5 -7.2 -7.5

Gross national product, at factor cost 206.6 220.2 224.4 259.5 333.7 351.7Gross national product, at market prices 239.1 258.3 263.7 293.4 368.5 393.3


/1 Preliminary.T2 Provisional.

Source: INSRE, and mission estimates.

Table 2.4: GROSS DOMESTIC PRODUCT BY EXPENDITURE, 1970-1975

(in constant market prices of 1970; in billions of FMG)

1970 1971 1972 1973 1974 X 917

Final consumption expenditure 213.3 226.0 227.3 216.7 213.0 208.0Private 167.2 175.3 182.0 174.7 171.4 166.4Government 46.1 50.7 45.4 42.0 41.6 41.5

Gross domestic capital formation 38.9 45.8 35.4 36.8 39.7 37.0Gross fixed capital formation 36.4 41.2 33.6 34.8 35.1 35.6


Increase in stocks 2.5 4.6 1.8 2.1 4.6 1.4

Exports of goods & nonfactor services 56.8 58.7 56.2 50.8 50.1 64.3Goods 40.1 41.0 40.9 42.0 42.3 55.2Nonfactor services 16.6 17.8 15.3 8.9 7.7 9.1

Imports of goods 6 nonfactor services 59.6 70.4 62.3 53.3 47.6 50.8Goods 39.5 47.4 3982.3 30.1 33.3Nonfactor services 20.0 23.0 22.5 21.0 17.5 17.5

Gross domestic product, in market prices 249.4 260.0 256.7 251.1 255.1 258.5

Net indirect tax*s 32.4 37.4 37.2 28.9 25.5 29.0Import taxes 13.2 15.8 13.0 10.2 8.2 9.0Other indirect taxes 22.0 22.4 24.7 21.8 21.2 22.4Subsidies 2.7 0.8 0.5 3.1 4.0 2.5

Gross domestic product, at factof cost 216.9 219.5 222.1 229.7 229.5

Net factor income from abroad -10.3 -10.4 -9.4 -5.7 -5.6 -5.6

Gross national product, at factor cost 206.6 212.2 210.1 216.5 224.1 223.8Gross national product, at market prices 239.1 249.6 247.3 245.4 249.5 252.9


L1 Preliminary./2 Provisional.


Table 2.5: INVESTMENT AND SAVING, 1970-1975

(in current prices; in billions of FMG)

1970 1971 1972 1973 197 4L- 1975/2

Gross domestic fixed capital formation 36.4 42.7 36.0 40.1 47.0 49.4Public 14.1 14.9 14.2 16.3 18.5 19.0Private 22.3 27.8 21.8 23.8 28.5 30.4

Increase in stocks 2.5 4.7 1.9 2.5 6.8 2.2Gross domestic capital formation 38.9 47.4 37.9 42.5 53.8 51.6

Resource balance /3 -2.8 -13.9 -8.2 -7.7 -14.7 -8.2

Domestic saving 36.1 33.5 29.7 34.9 39.1 43.4

Central government 7.9 10.4 4.6 5.1 6.4 6.8Other sectors 28.2 23.1 25.1 29.8 32.7 36.6

Net factor income from abroad -10.3 -10.8 -10.1 -6.5 -7.2 -7.5Workers' remittances (net) -6.5 -6.5 -7.4 -5.1 -5.4 -5.5Direct investment income (net) -3.7 -4.4 -3.2 -1.8 -2.7 -2.9Other investment income (net) . 0.1 0.5 0.4 0.9 0.9

National savinh, excluding current transfers from abroad 25.8 22.7 19.7 28.4 31.9 35.9

Net current transfers from abroad 8.8 9.2 9.2 7.4 9.4Public 5.7 5.6 6.2 3.7 4.0Private 3.1 3.6 3.0 3.7 5.4

National saving, including current transfers from abroad 34.6 31.9 28.9 35.8 41.319 = === =

= less than FMG 50 million.= not available.

/1 preliminary./2 provisional./3 Exports of goods and nonfactor services minus imports of goods and nonfactor services.


Table 2.6: GROSS DOMESTIC INCOME (GDY), 1970-1975

(in constant prices of 1970)

1970 1971 1972 1973 1974 1975P

(---------------in billions of FMG---------------)

Gross Domestic Product, at market prices 249.36 260.04 256.68 251.06 255.13 258.48

Merchandise exports, expressed as "capacity to import" L 40.14 39.35 39.22 37.59 30.00 36.69Merchandise exports, in constant prices of 1970 40.14 40.95 40.87 41.99 42.33 55.20

/2Gains from changes in the terms of trade 0.00 -1.60 -1.65 -4.40 -12.33 -18.51

Gross Domestic Income (GDY) 249.36 258.44 255.03 246.66 242.80 239.97

(-----------in millions of U.S. dollars----------)

Gross Domestic Product, at market prices 897.91 936.37 924.29 904.03 918.68 930.76

Merchandise exports, expressed as "capacity to import"- 144.54 141.71 141.23 135.35 108.03 132.10Merchandise exports, in constant prices of 1970 144.54 147.47 147.17 151.20 152.42 198.75

Gains from changes in the terms of trade- 0.00 -5.76 -5.94 -15.85 -44.39 -66.65

Gross Domestic Income (GDY) 897.91 930.61 918.35 888.18 874.29 864.11

p a provisional/1 Deflated by the import price index./2 Negative sign denotes losses.

Note: Exports are adjusted from customs data to balance of payments definition.


Table 2.7: RESOURCE GAP, 1970-1975

(in constant prices of 1970)

1970 1971 1972 1973 1974 1975P

(---------------------in billions of FMG--------------------)Imports of goods and nonfactor services

(in constant prices of 1970) 59.5 70.4 62.3 53.3 47.6 50.8Exports of goods and nonfactor services

(expressed as "capacity to import"-1) 56.8 57.1 54.5 46.4 37.7 45.8

Resource Gap 2.8 13.3 7.7 6.8 9.9 4.9

(----------------in millions of U.S. dollars----------------)Imports of goods and nonfactor services

(in constant prices of 1970) 214.44 253.64 224.23 191.84 171.49 182.80Exports of goods and nonfactor services

(expressed as "capacity to import"/l) 204.37 205.65 196.33 167.23 135.89 165.01

Resource Gap 10.07 47.99 27.90 24.61 35.60 17.79


p a Preliminary.

/1 Deflated by the price indices for imports of goods and of nonfactor services, respectively.


Table 3.1: BALANCE OF PAYMENIS - SUMMARY, 1970-1974

(in millions of U.S.$)

1970 1971 1972 1973 1974Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit

Trade Balance 2.19 - - 30.08 - 2.52 28.05 - - 0.95

Merchandise f.o.b. 144.54 142.36 147.00 177.08 165.55 168.07 199.83 171.78 240.97 241.92

Non-Factor Services (net) - 12.26 - 20.06 - 29.97 - 62.40 - 60.18

Non-monetary gold - - -Freight & insurance on merchandise 2.82 24.24 3.53 31.97 2.50 33.69 5.01 33.89 4.79 42.62Other transportation 9.33 20.32 11.33 20.01 11.57 20.02 10.02 29.20 21.00 28.72Travel 2.53 14.83 3.59 17.33 2.65 21.34 2.16 21.34 2.07 17.21Other government services 40.62 2.54 43.18 2.78 41.35 3.47 21.76 11.67 13.09 3.89Other private services 4.53 10.17 5.92 15.52 6.06 15.59 6.68 11.92 6.70 15.40

Factor Services (net) - 37.10 - 39.01 - 39.88 - 29.11 - 29.90

Investment income 1.86 15.41 2.94 18.39 4.35 14.92 5.25 11.48 6.91 14.35Workers' remittances - 23.55 - 23.56 - 29.30 - 22.89 - 22.47

Current Transfers (net) 31.68 - 33.38 - 36.48 - 33.12 - 38.95 -

Private 12.80 1.81 14.87 1.72 14.56 Z.61 18.89 2.20 23.32 0.86Public 24.08 3.39 23.68 3.45 27.74 3.21 19.42 2.99 20.36 3.87

Balance on Goods Servicest andLurrent 'i'ransters - 15.50 - 55.77 - 35.89 - 30.35 - 52.08

Capital Movements (net) 36.00 - 63.07 - 46.04 - 42.24 - 16.19 -

Non-monetary sectors (net) 42.08 - 55.64 - 52.99 - 47.75 - 40.59 -Monetary sectors (net) - 6.08 7.43 - - 6.95 - 5.51 - 24.40

Allocation of SDRs 3.19 - 2.79 - 3.03 - - - - -

Reserves and Related Items (net) - 17.75 - 5.39 - 6.26 - 10.77 36.05 -

Errors and Omissions (net) - 5.94 - 4.70 - - L.1 - 0.15

For notes and sources, see Tables 3.3 and 3.4.

Table 3.2: BALANCE OF PAYMENTS - SUMMARY, 1970-1974

(billions of FMG)

1970 1971 1972 1973 1974

Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit

Trade Balance 0.61 - - 8.33 - 0.64 6.25 - - 0.23

Merchandise f.o.b. 40.14 39.53 40.72 49.06 41.75 42.39 44.50 38.26 57.95 58.18

Non-Factor Services (net) - 3.41 - 5.56 - 7.56 - 13.90 - 14.47

Non-monetary goldFreight & insurance on merchandise 0.78 6.73 0.98 8.86 0.63 8.50 1.12 7.55 1.15 10.25

Other transportation 2.59 5.64 3.14 5.54 2.92 5.05 2.23 6.50 5.05 6.91

Travel 0.70 4.12 0.99 4.80 0.67 5.38 0.48 4.75 0.50 4.14

Other government services 11.28 0.70 11.96 0.77 10.43 0.87 4.85 2.60 3.15 0.93

Other private services 1.26 2.82 1.64 4.30 1.53 3.93 1.49 2.66 1.61 3.70

Factor Services (net) - 10.30 - 10.81 - 10.06 - 6.48 - 7.19

Investment income 0.52 4.28 0.81 5.10 1.10 3.76 1.17 2.56 1.66 3.45

Workers' remittances - 6.54 - 6.53 - 7.39 - 5.10 - 5.41

Current Transfers (net) 8.80 - 9.25 - 9.20 - 7.38 - 9.37 -

Private 3.56 0.50 4.12 0.48 3.67 0.66 4.21 0.49 5.61 0.21

Public 6.69 0.94 6.56 0.96 7.00 0.81 4.32 0.67 4.90 0.93

Balance on Goods, $ervices, and

current Transfers - 4.31 - 15.45 - 9.05 - 6.76 - 12.53


Non-monetary sectors (net) 11.69 - 15.41 - 13.37 - 10.63 - 9.76 -

Monetary sectors (net) - 1.69 2.06 - - 1.75 - 1.23 - 5.87

Allocation of SDRs 0.89 - 0.77 - 0.77 - - - - -

Reserves and Related Items (net) - 4.93 - 1.49 - 1.58 - 2.40 8.67 -

Errors and Omissions (net) - 1.65 - 1.30 _ 1.75 - 0.25 - 0.04

For notes and sources, see Tables 3.3 and 3.4.

Table 3.3: BALANCE OF PAYMENTS - CURRENT ACCOUNT, 1970-1974

(billions of FMG)

Item No./I 1970 1971 1972 1973 1974Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit

1.(A) Merchandise exports, f.o.b. 40.14 - 40.72 - 41.75 - 44.50 - 57.95 -1.(B) Merchandise imports, f.o.b. - 39.53 49.06 - 42.39 - 38.26 - 58.181. Merchandise trade, f.o.b., total 40.14 39.53 40.72 49.06 41.75 42.39 44.50 38.26 57.95 58.18

Trade Balance 0.61 - - 8.33 - 0.64 6.25 - - 0.23

2. Non-monetary gold . . . . . . .3. Freight & insurance on merchandise 0.78 6.73 0.98 8.86 0.63 8.50 1.12 7.55 1.15 10.254. Other transportation 2.59 5.64 3.14 5.54 2.92 5.05 2.23 6.50 5.05 6.915. Travel 0.70 4.12 0.99 4.80 0.67 5.38 0.48 4.75 0.50 4.147. Other governret services 11.28 0.70 11.96 0.77 10.43 0.87 4.85 2.60 3.15 0.938. Other private services 1.26 2.82 1.64 4.30 1.53 3.93 1.49 2.66 1.61 3.70

Non-factor services, total 16.61 20.02 18.71 24.27 16.18 2T373 10.16 24.06 -1 MT 25.93

Non-Factor Services, Net - 3.41 - 5.56 - 7.56 - 13.90 - 14.47

6. Investment income 0.52 4.28 0.81 5.10 1.10 3.76 1.17 2.56 1.66 3.456.1. Direct investment income - 3.75 - 4.38 - 3.20 - 1.83 - 2.666.2.(A) Other invastment income 0.52 - 0.81 - 1.10 - 1.17 - 1.66 -6.2.(B) Interest on public debt - 0.53 - 0.72 - 0.56 - 0.73 - 0.809.1. Workers' remittances - 6.54 _ 6.53 - 7.39 - 5.10 - 5.41

Factor services, total 0.52 10.82 0.81 11.62 1.10 11.16 1.17 7.65 1.66 8.85

Factor Services, Net - 10.30 - 10.81 - 10.06 - 6.48 - 7.19

9.2. Private transfers 3.56 0.50 4.12 0.48 3.67 0.66 4.21 0.49 5.61 0.21lO.(A) Public current transfers 6.69 0.94 6.56 0.96 7.00 0.81 4.32 0.67 4.90 0.93l0.1.(A) Technical assistance/2 5.56 0.79 5.35 0.78 6.37 0.60 4.20 0.45 4.75 0.72l0.1.(A) Budgetary aid 1.02 - 1.10 - 0.50 - - - - -10.2. Other 0.10 0.16 0.11 0.17 0.13 0.21 0.13 0.22 0.14 0.22

Current transfers, total 10.24 1.45 10.68 1.43 10.67 1.47 8.53 1.15 10.51 1.14

Current Transfers, Net 8.80 - 9.25 - 9.20 - 7.38 - 9.37 -

§,pjjjjcfr op CTiyfld jqryicfq, l a,dCurrent Transters - 4.31 - 15.45 - 9.05 - 6.76 - 12.53

* less than 5 million FMG./1 Refers to item numbers in the IMF Balance of Payments Yearbook./2 Technical assistance grants (credits) are shown net of scholarships.

Source: Mission estimates, based on information supplied by the Central Bank, INSRE, IMF, OECD (DAC reports) and IBRD (DRS).

Table 3.4: BALANCE OF PAYMENTS - CAPITAL MOVEMENTS AND RESERVES, 1970-1974

(billions of FMC)

1970 1971 1972 1973 1974Item No./l Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit

Balance on Goods, Services, andCurrent Transfers - 4.31 - 15.45 - 9.05 - 6.76 - 12.53


Non-monetary sectors (net) 11.69 - 15.41 - 13.37 - 10.63 - 9.76 -11. Direct investment (net) 5.52 - 7.21 - 5.52 - 3.40 - 2.36 -12. Other private long-term capital - 0.97 - 0.01 - 0.13 - 0.14 - 0.3013. Other private short-term capital 0.03 - - 0.07 - 0.13 - 0.13 - 0.29l0.1.(B) Capital grants & grant-like flows 5.61 - 5.70 - 13.27/2 - 3.76 - 4.82 -14. Other local government - 0.20 - 0.20 - 0.19 - 0.16 - 0.0515. Other central government 2.54 0.82 3.70 0.93 2.81 7.79/3 5.46 1.57 4.38 1.17

Monetary sectors (net) - 1.69 2.06 - - 1.75 - 1.23 - 5.8716. Deposit money banks 0.89 1.87 2.17 0.82 0.02 1.91 * /4 * /4 - * /416.1. Long-term loans received 0.01 - 0.23 - - 0.05 0.OI - - .. /516.2. Other liabilities 0.89 - - 0.82 0.02 - 0.38 - - 1.13/516.3. Discounted bills - 0.80 1.19 - - 0.79 - 2.88/4 - ..*-16.4. Other assets _ 1.07 0.75 - - 1.07 1.26/4 - - 4.74/4 617. Central Bank (assets) - 0.72 0.71 - 0.14 - *- 77 * /7 - *- /7

18. Allocation of SDRs 0.89 - 0.77 - 0.77 _- -_

Reserves and Related Itema (net) - 4.93 - 1.49 - 1.58 _ 2.40 8.67 -

19. Liabilities (net) - . . - 0.38 - - 0.25 3.10 -19.1. Use of IMF credit - - - - - - - - 0.94 -19.2. Other liabilities - . . - 0.38 - - 0.25 2.16 -

20. Assets (net) - 4.93 _ 1.49 - 1.96 - 2.15 5.57 -20.1. Monetary gold - - - - -- - - -20.2. SDRs _ 0.89 - 0.77 - 0.77 . - 2.38 -20.3. Reserve position in the IMF - 0.49 -- - - - 1.40 -20.4. Foreign exchange/8 - 3.56 - 0.45 - 1.21 - 2.35 3.57 -20.5. Other assets - - - 0.28 0.02 - 0.20 - - 1.77

Errors and Omissions (net) - 1.65 - 1.30 - 1.75 - 0.25 - 0.04

. less than 5 million FMG.* included elsewhere.

* * not identifiable in this format./1 Refers to item numbers in the IMF Balance of Payments Yearbook.T7 Includes cancellation of debt by France: 6.76 billion FMG.73 Includes counterpart entry for debt cancellation; see note 2.7R Includes Central Bank assets; see note 7./5 Long-term loans received are included with "other liabilities".76 Discounted bills are included with "other assets".77 Included with "other assets" of deposit money banks; see note 4.78 Includes Treasury holdings.

Source: Mission estimates, based on information supplied by the Central Bank, INSRE, IMF, OECD (DAC) and IBRD (DRS).

Table 3.5: FINANCIAL FLOWS FROM AND TO DAC MEMBER COUNTRIES

AND MULTILATERAL ORGANIZATIONS, 1970-1974

(SUMMARY)

(in millions of U.S. dollars)

1970 1971 1972 1973 1974 r

I. Official Flows

A. Bilateral

Official Development Assistance (ODA) 32.07 33.02 67.63 37.22 37.58Technical assistance grants 17.62 17.69 23.79 19.08 20.62Other grants 7.99 7.95 37.99 8.69 6.43Loans 6.46 7.38 5.85 9.45 10.53

Other Official Flows (OOF' 0.01 0.11 1.49 1.16 0.90

Total Bilateral Official Flows (Rross) 32.08 33.13 69.12 38-28 38.48

Debt service payments -4.90 -4.99 -32.34 -7.04 -7.43

Total Bilateral Official Flows (net) 27.18 28.14 36.78 31.34 31.05

B. Multilateral

Official Development Assistance (ODA' 21.79 21.79 21.63 24.84 29.73r

Technical assistance grants 3.21 3.57 2.66 2.52 3.10Other grants 12.20 12.64 14.62 8.21 13.62Loans 6.38 5.58 4.35 14.11 13.01r

Other Official Flows 2.00 - - 1.00 -

Total Multilateral Official Flows (gross) 23.79 21.79 21.63 25.84 29.73r

Debt service payments -0.16 -0.29 -0.50 -0.85 -1.04

Total Multilateral Official Flows (net) 23.63 21.50 21.13 24.99 28.6 7r

Contributions to multilateral organizations -0.02 -0.04 -0.24 -0.03 -0.03

Total Multilateral Official Flows (net transfers) 23.61 21.46 20.89 24.96 28.6 4r

II. Private Flows (net)

Direct investment (net) -0.23 1.08 2.30 0.38 6.77Other long-term capital (net) 0.04 2.51 -0.23 -0.41 -0.89Guaranteed private export credits (net) -1.77 2.77 -0.19 -2.18 -1.91

Total Private Flows (net) -1.96 6.36 1.88 -2.21 3.97

III. Sutmarv

Official Flows (gross) 55.87 54.91 90.75 64.22 68.21Official Flows (net) 50.81 49.64 57.91 56.33 59.32Private Flows (net) -1.96 6.36 1.88 -2.21 3.97

Total Official and Private Flows (net) 48.85 56.00 59.79 54.12 6 3.71r

Notes: Negative sign (-) indicates outflow.For details, see Tables 3.6, 3.7 and 3.8.r m revised.

Source: OECD (Development Assistance Committee); IBRD Debtor Reporting System for details on loans

and debt service payments.

Table 3.6: BILATERAL OFFICIAL FINANCIAL FLOWS

FROM AND TO DAC MEMBER COUNTRIES, 1970-1974

(DETAILS)


1970 1971 1972 1973 1974

I. Official Development Assistance (ODA)

Technical Assistance Grants 17.62 17.69 23.79 19.08 20.62France 15.10 14.80 21.09 15.67 15.93Others 2.52 2.89 2.70 3.41 4.69

Other Grants 7.99 7.95 3799/ 8.69 6.43France 6.60 6.30 37.17- 6.98 4.29Others 1.39 1.65 0.82 1.71 2.14

Loans 6.46 7.38 5.85 9.45 10.53France 2.90 4.80 3.46 5.10 2.55Others 3.56 2.58 2.39 4.35 7.98

Total ODA Grants and Loans (gross) 32.07 33.02 67.63 37.22 37.58

Debt Service Payments on ODA Loans -4.87 -4.94 -32.22 -6.88 -7.43Amortization payments -4.35 -4.42 -31.56 -6.06 -6.58Interest payments -0.52 -0.52 -0.66 -0.82 -0.85

Total ODA Grants and Loans (net flow) 27.20 28.08 35.41 30.34 30.15

II. Other Official Flows (OOF)

Official export credits - - 1.15 1.04 -Other long-term capital - - - - 0.80other 0.01 0.11 0.34 0.12 0.10

Total Other Official Flows (gross) 0.01 0.11 1.49 1.16 0.90

Debt Service Payments -0.03 -0.05 -0.12 -0.16 -Amortization payments -0.03 -0.05 -0.12 -0.16 -

Official export credits -0.03 -0.05 -0.12 -0.16 -Other _ _ _ _ _

Interest payments - - - - -

Total Other Official Flows (net) -0.02 0.06 1.37 1.00 0.90

III. Total Official Flows

Total Official Flows (gross) 32.08 33.13 69.12 38.38 38.48

Total debt service payments -4.90 -4.99 -32.34 -7.04 -7.43

Total Official Flows (net) 27.18 28.14 36.78 31.34 31.05

Note: Negative sign (-) indicates outflow.LI Includes cancellation of debt (US$26.896 million.)

Source: OECD (Development Assistance Committee).

Table 3.7: FINANCIAL FLOWS FROM AND TO MULTILATERAL ORGANIZATIONS, 1970-1974

(DETAILS)


1970 1971 1972 1973 19 74r

I. Official Development Assistance (ODA)

Technical Assistance Grants 3.21 3.57 2.66 2.52 3.10

European Development Fund 0.36 0.22 0.31 0.29 0.39

Other organizations 2.85 3.34 2.35 2.23 2.71

Other Grants 12.20 12.64 14.62 8.21 13.62

European Development Fund 11.92 12.13 14.05 7.46 13.00

Other organizations 0.28 0.51 0.57 0.75 0.62

Loans 6.38 5.58 4.35 14.11 13.01

European Development Fund - - - - 0.76

IBRD 1.36 3.29 2.13 3.51 0.13

IDA 5.02 2.30 2.22 10.60 12.13

Other organizations - _ _ _ _

Total ODA Grants and Loans (gross' 21.79 21.79 21.63 24.84 29*7 3r

Debt Service Payments -0.13 -0.29 -0.07 -0.84 -1.06

Amortization payments - - - - -

Interest payments -0.13 -0.29 -0.07 -0.84 -1.06

Total ODA Grants and Loans (net) 21.66 21.50 21.56 24.00 28.67r

II. Contributions to Multilateral Organizations

Grants -0.02 -0.04 -0.04 -0.03 -0.03

Subscriptions - - -0.20 - -

Total Contributions to Multilateral OrRanizations -0.02 -0.04 -0.24 -0.03 -0.03

III. Other Official Flows (OOF'

Disbursements 2.00 - - 1.00 -

Other long-term capital, IBRD 2.00 - - 1.00 -

Debt Service Payments

Total Other Official Flows (gross and net) 2.00 - - 1.00 -

IV. Total Official Flows

Total Official Flows (gross) 23.79 21.79 21.63 25.84 2 9 . 7 3 r

Total Debt Service Payments -0.13 -0.29 -0.07 -0.84 -1.06

Total Official Flows (net) 23.66 21.50 21.56 25.00 28.6 7r

Total Contributions to Multilateral Organizations -0.02 -0.04 -0.24 -0.03 -0.03

Total Official Flows (net transfers) 23.64 21.46 21.32 24.97 28.64

Notes: Negative sign (-) indicates outflow.r a revised.

Source: OECD (Development Assistance Co mittee); IBRD Debtor Reporting System for details on loans

and debt service payments.

Table 3.8: PRIVATE FINANCIAL FLOWS (NET)

FROM AND TO DAC MEMBER COUNTRIES, 1970-1974 (DETAILS)


1970 1971 1972 1973 1974

Direct Investment (net) -0.23 1.08 2.30 0.38 6.77

Manufacturing - 0.09 - 0.01 1.19Petroleum -0.37 0.47 2.18 -0,21 6.12Other extractive industries - 0.30 - - 0.36Other & unallocated 0.14 0.22 0.12 0.58 -0.90

Portfolio Investment (net) 0.04 2.51 -0.23 -0.41 -0.89

Monetary - 3.44 -1.68 -0.73 -1.10Non-monetary 0.04 -0.93 1.45 0.32 0.21

Private Export Credits (net) -1.77 2.77 -0.19 -2.18 -1.91Private Export Credits (gross) 1.87 11.88 6.39 3.78 5.24

Total Private Investment and Lending (net) -1.96 6.36 1.88 -2.21 3.97

Note: Negative sign (-) indicates outflow.

Source: OECD (Development Assiqtance Committee).

Table 3.9: MERCHANDISE EXPORTS 1960-1974: VALUJE F.O.B.

(in millions of FMG)

A. FOOD AND AGRICULTURAL COMMODITIES

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Total merchandiae exporta 18,484.7 22,632.3 241315 2571. 28,607.9 29,153.7 4022. 40,806.9 41,864.1 44,750. 58,503.9

Food crops

Coffee 5,817.8 7,132.9 7,594.1 8,124.0 8,805.4 8,272.3 10,938.2 10,819.5 11,645.2 13,300.0 15,600.3Vanilla 1,642.3 2,436.7 2,216.0 1,672.0 2,530.0 3,012.6 3,610.3 3,565.7 3,819.1 2,217.1 4,475.5Cloves 303.3 743.6 579.2 875.6 1,958.2 407.2 4,696.9 5,736.7 4,206.8 4,058.0 4,008.1Pepper 344.9 316.8 259.8 259.3 491.9 565.3 539.1 435.4 1,004.3 1,025.0 1,047.4

(of which: green pepper)(*) (64.4) (0.6) (0.8) (6.2) (26.2) (51.9) (120.3) (182.8) (270.0) (285.1)

Cocoa 52.7 35.1 89.4 85.7 114.1 132.5 133.3 119.8 140.8 23 7. 9 418.3Cinnamon 2.2 31.7 -68.3 67.5 66.7 408.7 86.4 100.7 100.4 91.0 84.2Rice 1,177.4 6 75. 7 1,052.3 1,854.3 3,047.2 2,438.3 3,071.9 2,050.5 1,650.5 559.8 1,071.1

(of which: de luxe) (688.1) (614.2) (805.5) (765.4) (875.6) (909.8) (995.2) (1,220.0) (1,174.4) (553.3) (1,042.9)Maize 72.3 13.7 51.9 76.3 18.9 5 7 .7 38.4 95.1 34.7 12.0 7.0

Lima beana (poia du cap) 478.1 599.5 544.8 340.3 487.6 521.2 720.8 693.0 776.0 815.1 1,642.7Beans (dry) 93.6 247.9 163.2 196.7 152.2 224.3 279.3 238.4 252.6 210.5 82.8Lentils (dry) 6.7 32.4 19.7 23.1 23.9 18.7 28.7 9.3 11.0 14.7 20.5Casa aaa 106.3 107.9 194.6 137.0 66.4 43.7 47.9 25.0 20.4 10.3 -Other vegetables 14.2 43.7 39.0 58.0 50.9 50.2 42.3 31.7 18.9 21.5 16.2

bananas (fresh) 1.3 221.1 403.0 263.6 159.5 183.8 240.4 148.0 100.5 227.4 249.3Cashew nuts /1**** 50.1 52.3 57.2 55.7 31.8 54.0 33.7Other fruits & nuts 20.6 48.4 47.9 41.8 15.1 18.5 24.1 17.3 13.7 20.6 16.5

Other crops

Tobacco 713.4 877.4 1,088.3 482.7 382.5 541.6 502.7 488.5 749.3 672.9 413.2Medicinal & perfumery plants 4.9 59.8 72 .7 35.0 43.8 44.7 88.2 232.5 357.6 223.3 355.4Groundnuts 466.9 393.8 295.0 363.7 301.1 247.2 230.4 440.0 328.5 290.1 165.2Castor oil seeds 17.4 2 7. 7 17.9 32.0 41.0 15.5 17.8 20.1 18.6 131.4 33.3Cotton seeds 36.4 - 7.6 36.8 - 40.9 - 16.0 162.9 62.4

Cotton (raw, including linters) 101.0 35.8 1.5 2.0 1.2 3.7 204.5 104.2 5.6 248.9 3.5Sisal 610.1 1,339.6 973.3 721.3 748.5 878.4 743.4 811.7 921.4 1,552.2 2,545.6Raffia 789 .7 682.4 811.5 918.4 698.3 515.9 453.5 420.4 472.8 473.0 609.5Kapok 4.2 12.2 11.3 12.5 9.4 12.2 16.1 17.9 20.5 14.9 15.3Piassava 17.5 19.4 17.1 12.4 12.2 13.4 14.9 9.1 15.1 19.9 16.2

Livestock & fishing products

Live animals - cattle 111.9 169.3 240.9 295.8 277.2 300.1 324.3 339.3 312.7 229.2 297.2Live animals - pigs 24.6 14.5 0.4 - - 19.3 52.5 0.1 87.8 65.7 6.8Live animals - sheep & goats 3.2 5.7 12.2 16.5 15.1 14.1 13.7 8.5 15.6 12.3 18.8

Fish, crustaceans, molluscs 18.1 89.4 97.9 159.5 282.1 460.1 845.8 1,229.1 1,730.9 2,216.1 3,533.5Corals & sheilas 16.7 24.8 52.9 27.9 27.7 43.2 43.0 51.8 50.4 39.2 44.2

Meat (fresh, chilled, frozen) 689.7 977.6 905.2 527.9 575.1 663.2 1,218.8 1,930.9 3,000.6 3,156.1 2,429.3Meat preparations, extracts & juices 369.2 720.6 721.1 799.6 686.5 924.2 1,301.0 1,442.5 1,290.2 1,510.4 1,844.4Crocodile skins 172.9 86.7 122.2 94.6 82.4 70.5 54.4 37.7 52.9 48.9 46.3Other hides & skins; leather 327.0 264.4 4+63.7 276.8 2 29 .3 395.6 455.2 499.4 589.3 620.5 546.1Beeswax 40.7 41.1 54.9 80.5 31.0 95.5 77.4 41.6 67.3 19.3 85.8

For notes and sources, see Table 3.9(8.

Table 3.9: MERCHANDISE EXPORTS 1960-1974: VALUE F.O.B.

(cn nvlli.ns of FMG)

B. MANUJFACTUJRED GOODS AND MlNERAL PRODUCTS

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Food

Vegetable & fruit preparations 0.9 9.2 25 .7 58.0 2 3. 2 14.0 5. 2 7.0 10.8 12.4 14.6Sugar 1,3 77. 8 1,161.8 1,485.4 2,137.8 1 ,5 75.0 1,656.0 1,546.9 1,098.8 1,475.1 1 ,5 73. 5 1,727.8Molasses - 43.2 67.1 72.9 72.8 25.1 41.3 118.2 91.5 57.6 38 7.9Molasses spirits 49.3 79.4 61.8 83.5 70. 7 116.0 88.8 118.2 74.4 80.6 140.2Cassava starch 9.8 19.5 10.2 14.5 11.1 5.4 19.4 11.0 43.7 16.2 14.1Tapioca 260.7 211.1 245.9 240.0 245.4 198.9 249.9 186.8 225.9 206.9 139.2

Other semiprocessed and processed agricultural products

Essential oil of cloves 398.2 320.4 39 3. 9 369.2 72 3 .3 907.1 689.8 764.1 755.3 1,296.5 2,003.6Essential, oil of ylang ylang 98.8 139.4 132.1 117.1 101.0 102.0 126.6 98.1 113.0 130.7 145.2Other essential oils, oil concentrates, etc. 7 .7 13.5 22.8 26.1 2 7 .2 32.3 50.4 61.3 47.0 73.9 85.9Tanning & dyeing extracts 2.3 5.4 4.0 3.5 3. 5 18.6 2 7. 3 71.1 20.2 42.7 17.5Gelatin - .- . - - - - 0.5 6.9 90.4

Tung oil 61.0 105.1 141.5 7 7.9 32.0 52.9 114.3 25.2 8.1 17.9 19.4Oil-cake 38.2 124.5 122.6 111.5 23 7 .3 216.9 280.1 224.8 255.5 450.5 223.8Bran & sharps 2 7. 5 18.4 29.3 41.1 49.4 21.7 3.6 - - - -Cigarettes 36.4 15 9. 7 178.2 228.3 16 7. 9 184.1 153.9 188.9 161.9 202.9 153.3Other tobacco products 1.2 - 1.0 0.1 43.4 37.2 19.0 3.0 7.5 6.7 4.9

Textiles & shoes

Cotton yarn & fabrics 0.9 0.4 1.0 1.3 0.7 1.2 8.0 40.2 86.0 464.0 1,395.0Sisal cordage, ropes, etc. 14.0 41.7 34.0 21.6 9.2 11.4 20.5 20.7 16.3 42.9 99.7Textile clothing 1.9 3.6 1.9 19.5 33.9 77.6 110.1 79.4 59.2 29.2 21.8Other textiles 2. 5 4.2 3. 7 4.2 1.5 11.3 35.7 26.6 6.3 15.9 3.0Shoes 7.1 8.4 13.8 23.7 8.4 25.6 57.4 43.4 34.4 35.9 56.0

Wood & paper products

Rosewood 1.3 3.3 4.5 5.6 7. 2 11.4 30.0 14.5 16.3 41.6 124.4Other wood & wood products 6.3 31.9 12.0 10.7 31.5 80.5 78.6 29.9 13.7 60.9 43.6Plaits, plaiting materisls, mats, screens, etc. 119.6 137.8 130.4 101.8 124.2 124.3 98.8 76.4 92.6 110.6 93.0Basketware 6 wickerwork 0.4 3.1 5.9 4.6 5.2 5.7 9.3 8.9 30.7 34.1 103.7Paper & paper products 2.7 3.5 5.2 29.1 56.3 109.2 136.9 79.5 24.1 61.6 118.3

Mineral products 6 metals

Chromite - 26.1 - - 205.9 851.2 850.8 842.8 572.3 1,601.3Graphite 350.6 461.9 454.8 432.3 432. 7 508.9 650.3 605.8 663.1 648.2 825.4Mica 286.5 241.4 258.2 259.6 303. 1 390.3 310.0 190.7 252.0 33B.4 338.2Mica, worked - 12.5 12.2 9.8 21.9 24.0 21.2 17.7 30.5 44.7 31.0Precious & semiprecious stones 41.8 117.4 117.7 70. 9 65.1 6 7. 3 76.8 78.1 103.8 122.4 118.6Copper 5 3.9 34.8 5 6. 2 33. 2 35.8 56.5 96.3 41.1 40.0 46.1 53.3

Petroleum products 3 .2 2.1 166.5 983.2 985 .1 1,043.1 1,554.6 1,470.2 1,671.2 2,280.6 5,643.5

All other products 589.4 521.9 648.8 1,176.8 583. 6 1,145.6 1,406.3 1,869.4 660.9 1, 02 3.3 820.7

=less than 50,000 FMG.* =not separately available.

/1= included with other fruits and nuts in 1960-1967.

Note: Special exports, including reexports.

Source: INSRE.

Table 3.10: MERCHANDISE EXPORTS 1960-1974: PERCENTAGE COMPOSITION BY VALUE

(as percentage of total export value f.o.b.)

B. MANUFACTURED GOODS AND MINERAL PRODUCTS

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Food

Vegetable & fruit preparations . 0.04 0.11 0.23 0.08 0.05 0.01 0.02 0.03 0.03 0.02Sugar 7.45 5.13 6.16 8.31 5.51 5.68 3.85 2.69 3.52 3.52 2.95Molasses - 0.19 0.28 0.28 0.25 0.09 0.10 0.29 0.22 0.13 0.66Molasses spirits 0.27 0.35 0.26 0.32 0.25 0.40 0.22 0.29 0.18 0.18 0.24Cassava starch 0.05 0.09 0.04 0.06 0.04 0.02 0.05 0.03 0.10 0.04 0.02Tapioca 1.41 0.93 1.02 0.93 0.86 0.68 0.62 0.46 0.54 0.46 0.24

Other semiprocessed & processed agricultural products

Essential oil of cloves 2.15 1.42 1.63 1.44 2.53 3.11 1.71 1.87 1.80 2.90 3.42Essential oil of ylang ylang 0.53 0.62 0.55 0.46 0.35 0.35 0.31 0.24 0.27 0.29 0.25Other essential oils, oil concentrates, etc. 0.04 0.06 0.09 0.10 0.10 0.11 0.13 0.15 0.11 0.17 0.15Tanning & dyeing extracts 0.01 0.02 0.02 0.01 0.01 0.06 0.07 0.17 0.05 0.10 0.03Gelatin - - - - - - - 0.02 0.15

Tung oil 0.33 0.46 0.59 0.30 0.11 0.18 0.28 0.06 0.02 0.04 0.03Oil-cake 0.21 0.55 0.51 0.43 0.83 0.74 0.70 0.55 0.61 1.01 0.38Bran & sharps 0.15 0.08 0.12 0.16 0.17 0.07 0.01 - - - -Cigarettes 0.20 0.71 0.74 0.89 0.59 0.63 0.38 0.46 0.39 0.45 0.26Other tobacco products 0.01 - . . 0.15 0.13 0.05 0.01 0.02 0.01 0.01

Textiles & shoes

Cotton yarn & fabrics . . .. 0.01 . . 0.02 0.10 0.21 1.04 2.38Sisal cordage, ropes, etc. 0.08 0.18 0.14 0.08 0.03 0.04 0.05 0.05 0.04 0.10 0.17Textile clothing 0.01 0.02 0.01 0.08 0.12 0.27 0.27 0.19 0.14 0.07 0.04Other textiles 0.01 0.02 0.02 0.02 0.01 0.04 0.09 0.07 0.02 0.04 0.01Shoes 0.04 0.04 0.06 0.09 0.03 0.09 0.14 0.11 0.08 0.08 0.10


Rosewood 0.01 0.01 0.02 0.02 0.03 0.04 0.07 0.04 0.04 0.09 0.21Other wood & wood products 0.03 0.14 0.05 0.04 0.11 0.28 0.20 0.07 0.03 0.14 0.07Plaits, plaiting materials, mats, screens, etc. 0.65 0.61 0.54 0.40 0.43 0.43 0.25 0.19 0.22 0.25 0.16Basketware & wickerwork . 0.01 0.02 0.02 0.02 0.02 0.02 0.02 0.07 0.08 0.18Paper & paper products 0.01 0.02 0.02 0.11 0.20 0.37 0.34 0.19 0.06 0.14 0.20

Mineral products & metals

Chromite - 0.12 . - - 0.71 2.12 2.08 2.01 1.28 2.74Graphite 1.90 2.04 1.88 1.68 1.51 1.75 1.62 1.48 1.58 1.45 1.41Mica 1.55 1.07 1.07 1.01 1.06 1.34 0.77 0.47 0.60 0.76 0.58Mica, worked - 0.06 0.05 0.04 0.08 0.08 0.05 0.04 0.07 0.10 0.05Precious & semiprecious stones 0.23 0.52 0.49 0.28 0.23 0.23 0.19 0.19 0.25 0.27 0.20Copper 0.29 0.15 0.23 0.13 0.13 0.19 0.24 0.10 0.10 0.10 0.09

Petroleum products 0.02 0.01 0.69- 3.82 3.44 3.58 3.87 3.60 3.99 5.10 9.65

All other products 3.19 2.31 2.69 4.58 2.04 3.93 3.50 4.58 1.58 2.29 1.40

less than 0.005 perceant of total.* = not separately available./1 = included with other fruits and nuts in 1960-1967.

Note: Components may not add up to totals due to rounding.

Source: Table 3.9.

Table 3.11: MERCHANDISE EXPORTS 1960-1974: QUANTITIES

(in metric tons)

A. FOOD AND AGRICULTURAL COMMODITIES

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Total merchandise exports 235,116 287,345 378,728 489,402 561,507 592,419 782,001 700 593 714,969 731,742 778,066

Food crops

Coffee 40,220 50,063 45,657 49,915 53,813 49,591 51,956 51,900 56,245 65,402 65,381Vanilla 270 984 885 666 961 1,097 1,218 1,160 1,215 720 1,353

Cloves 1,826 4,423 3,373 5,259 12,425 974 5,278 7,496 6,116 6,240 5,070Pepper 1,045 1,543 1,108 1,451 3,095 3,493 2,227 1,434 4,187 3,740 2,898

(of which: green pepper) (*) (375) (2) (2) (9) (6) 66 150 361 547 657

Cocoa 344 342 776 643 668 547 748 935 1,060 1,046 1,139

Cinnamon 27 277 566 493 443 2,033 630 694 661 498 412Rice 23,725 10,889 19,562 40,034 69,305 51,890 67,923 35,632 26,039 6,276 6,532

(of which: de luxe) (11,397) (9,091) (12,306) (11,394) (12,050) (11,391) (12,131) (13,853) (13,626) (6,139) (6,191)Maize 5,167 882 3,344 5,084 1,308 3,883 2,180 5,470 2,256 644 198

Lima beans (pois du cap) 12,843 16,372 16,515 8,145 10,107 9,200 12,531 15,429 17,190 19,097 19,790Beans (dry) 1,962 3,836 3,040 3,470 2,448 3,427 3,801 3,396 3,633 3,573 927

Lentils (dry) 59 298 161 175 198 232 370 85 94 99 132Cassava 8,938 7,484 13,604 11,400 5,692 3,476 3,497 1,527 1,456 680 -Other vegetables 342 1,151 871 847 819 798 1,047 607 369 302 208

Bananas (fresh) 79 18,302 33,218 21,517 12,466 10,730 12,494 7,092 4,156 6,557 7,015

Cashew nuts a * * * t 1,009 977 855 873 525 958 630Other fruits & nuts 560 1,759 1,270 1,093 326 333 405 256 249 311 250

Other crops

Tobacco 2,997 3,881 4,842 2,193 2,472 a,776 2,419 2,384 3,217 2,753 1,479Medicinal & perfimery plants 30 435 720 495 589 546 828 1,653 2,043 1,272 1,496

Groundnuts 8,129 6,008 3,973 5,682 5,077 3,860 3,194 5,227 4,568 4,089 1,953Castor oil seeds 536 1,052 691 1,066 1,125 467 531 555 457 1,720 338

Cotton seeds 3 2,780 - 500 1,020 - 2,699 - 984 8,817 2,440

Cotton (raw, including linters) 680 231 33 43 27 51 1,334 743 225 1,193 136Sisal 11,286 28,676 23,305 20,151 25,029 24,733 21,282 23,002 24,445 22,814 21,057Raffia 6,412 6,669 6,719 7,229 5,941 5,210 5,050 4,268 4,677 4,076 3,818Kapok 30 100 97 130 99 119 139 147 162 124 149

Piassava 97 73 73 54 56 58 61 28 38 46 34

Livestock & fishing products

Live animals - cattle 2,496 3,724 5,260 6,567 6,242 6,453 6,870 6,714 4,456 1,750 1,874

Live animals - pigs 227 119 4 - - 117 328 471 340 33

Live animals - sheep & goats 41 99 203 298 286 224 218 124 165 94 132

Fish, crustaceans, molluscs 187 436 597 1,176 1,464 1,720 2,451 3,102 3,738 7,027 14,337

Corals & shells 131 82 133 104 109 174 164 146 185 145 224

Meat (fresh, chilled, frozen) 3,586 4,641 4,433 2,682 3,073 3,406 5,357 8,074 10,250 8,692 6,284

Meat preparations, extracts & juices 1,462 2,839 2,850 3,361 2,640 3,523 4,269 4,101 3,881 4,133 4,571

Crocodile skins 45 20 18 14 11 8 7 5 4 4 4

Other hides 6 skins; leather 2,811 2,910 3,605 2,251 2,492 3,484 2,903 2,785 2,245 1,463 1,323Beeswax 204 190 244 242 91 270 221 136 230 135 191

For notes and sources see Table 3.11 (B).

Table 3.11: MERCHANDISE EXPORTS 1960-1974: QUANTITIES

(in metric tone)

B. MANUFACTURED GOODS AND MINERAL PRODUCTS

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Food

Vegetable & fruit preparations 5 72 2 25 4 33 161 129 24 30 30 38 3 7Sugar 41,242 34,961 89,770 76, 742 56,053 62,104 49,999 33,394 36,901 37,286 13,612Mol1asses - 9,830 20,530 16,730 22,660 11,220 12,188 27,984 18,934 8,850 36,000M4olasses spirits 630 812 701 803 630 1,030 1,294 1,201 561 566 1,294Cassava starch 347 825 350 393 514 150 682 276 1,246 339 210Tapioca 6,760 4,925 5,745 5,125 5,126 4,231 4,877 3,627 4,045 3,205 1,790

Other seisiprocessed and processed agricultural products

Essential oil of cloves 780 810 877 7 30 1,158 1,189 963 1,009 996 1,346 1,128Essential oil of ylang ylang 26 36 30 27 26 25 31 25 28 28 24Other essential oils, oil concentrates, etc. 2 2 3 4 4 6 7 7 8 14 11Tanning & dyeing extracts 11 23 22 14 13 76 142 137 93 109 88Gelatin - .- - - - - - 2 - 252

Tung oil 546 764 1,411 899 4 77 747 956 3 37 117 174 118Oil-cake 2, 278 5,559 5,027 5,116 10,589 9,042 20,261 8,212 10,009 13,032 6,772Bran & sharps 2,816 1,660 2,611 3,829 5,696 2,568 3 75 - - - -Cigarettes ill 320 311 350 244 255 208 256 216 245 189Other tobacco products 4 - 2 *64 53 2 7 11 17 4 8

Textiles & shoes

Cotton yarn & fabrics 2 .2 1 1 1 11 60 139 812 2,508Sisal cordage, ropes, etc. 162 387 355 215 81 121 2 15 2 15 146 340 5 77Textile clothing 4 1 1 14 21 34 42 31 20 12 8Other textiles 22 17 2 7 17 13 49 279 2 75 39 134 13Shoes 11 8 18 28 11 49 103 66 55 51 72


Rosewood 64 144 325 2 77 395 589 909 495 421 1,108 2,794other wood & wood products 155 2,835 461 281 1,464 2,189 3,469 976 214 2,059 949Plaits, plaiting materials, mats, screens, etc. 218 324 293 228 274 247 182 151 179 221 179Basketware & wickermork 1 20 26 24 34 33 37 39 94 116 269Paper 6 paper products 46 22 84 380 725 1,893 1,930 870 293 785 960

Mineral products & metals

Chromute - 7,800 1 - - 32,980 130,342 105,269 117,885 97,952 280,320Graphite 15,824 17,944 16,815 16,199 15,886 18,514 20,307 1 7, 7 77 18,334 17,568 17,451Mica 994 952 9 57 1,017 1,415 2,319 1,201 942 1,143 1,796 1,871Mica, worked - 6 4 4 8 8 5 4 6 9 5Precious- & semiprecious stones 103 189 ill 92 90 76 139 138 182 205 236Copper 467 2 37 2 70 196 181 2 59 340 2 13 230 249 183

Petroleunm products 44 31 22,679 142,628 196,831 229,624 300,746 286,358 300,176 34/,207 312,803

=lass than 500 kg3.*=not separately available.

/1 Included with other fruits and nuts in 1960-1967.

Note: Special exports, Including reexports.

Source: INSRE.

Table 3.12: MERCHANDISE IMPORTS 1970-1974: VALUE C.I.F.


1970 1971 1972 1973 1974

Total Merchandise Imports 47,346.2 59,261.7 51,754.5 45,155.3 679256.9

Food & Beverages 4,923.2 7,248.8 5,827.4 7,244.8 12,638.4Rice 667.6 1,820.3 1,223.2 2,869.3 9,259.3Other cere-als & cereal products 707.1 968.2 1,147.9 1,058.8 881.3Dairy products 1,191.3 1,557.3 1,416.9 918.5 1,041.0Processed food 947.4 1,135.0 868.0 1,029.9 708.4Beverages 1,161.3 1,409.1 958.5 1,159.0 518.0Other 248.5 358.9 212.9 209.3 230.4

Other Consumer Goods 8,766.8 11,595.3 9,712.4 8,724.6 9,400.9Tobacco & tobacco products 406.7 460.2 490.0 256.2 201.3Soap & cosmetics 542.8 646.7 260.0 250.6 144.9Pharmaceuticals 1,345.6 1,526.8 1,622.8 1,635.9 2,397.8Books & periodicals 329.6 464.1 358.0 305.7 455.5Textiles 1,384.4 1,805.7 1,286.6 1,004.4 945.3Rubber products 828.8 1,232.7 1,028.1 892.9 1,072.1Cutlery & household tools 131.0 229.4 202.0 131.6 235.6Electrical equipment 1,045.7 1,525.6 1,192.3 1,538.6 1,824.9Cars, motorcycles, etc. 241.8 433.3 362.6 348.7 330.6Other 2,510.4 3,270.8 2,910.0 2,360.0 1,792.9

Mineral Fuels & Lubricants 3,491.1 3,888.0 4,454.0 4,310.8 12,118.7Crude petroleum 2,406.2 2,427.9 3,089.1 3,315.1 10,750.5Petroleum products 967.2 1,331.6 1,249.3 929.2 1,266.4Other 117.7 128.4 115.7 66.5 101.8

Other Intermediate Goods 17,245.5 18,789.8 15,460.7 13,489.1 21,612.5Oils & fats (animal & vegetal) 513.6 1,152.0 728.6 761.9 2,091.5Textile fibres & tissues 3,020.8 3,329.5 3,002.0 2,064.8 2,538.7Plastics 907.1 1,014.2 721.4 692.1 1,340.0Fertilizer 598.3 398.9 137.0 348.0 404.8Other chemicals 3,030.3 2,817.2 2,615.5 2,476.5 4,705.6Pulp & paper 936.3 1,082.8 820.3 742.1 1,308.4Cement 502.9 722.3 471.1 393.1 334.0Iron & steel products 4,385.2 4,308.4 3,692.9 3,205.6 5,748.1Other metals & metal products 1,071.8 1,293.3 1,018.7 981.1 990.7Parts for cars, motorcycles, etc. 957.6 1,170.3 970.8 760.7 957.6Animal feed 68.9 122.2 71.3 60.9 32.1Other 1,252.7 1,378.7 1,211.1 1,002.3 1,161.0

Capital Goods 12,919.6 17,739.8 16,201.7 11,386.0 11,486.3Machinery 5,534.0 7,027.7 7,011.6 4,162.6 5,182.5Electrical machinery 1,919.6 2,870.1 2,856.1 2,161.0 2,210.2Transport equipment 4,437.9 6,349.4 5,211.2 4,391.8 3,260.4Tools & instruments 1,024.9 1,487.4 1,102.0 663.3 821.8Live animals 3.1 5.2 20.8 7.1 11.3

Source: INSRE, Statistiques du Commerce Exterieur de Madagascar.

Table 3.13: MERCHANDISE IMPORTS 1970-1974: PERCENTAGE COMPOSITION BY VALUE

(as percentage of total import value c.i.f.)

1970 1971 1972 1973 1974

Total Merchandise Imports 100.00 100.00 100.00 100.00 100.00

Food & Beverages 10.40 12.23 11.26 16.04 18.79Rice 1.41 3.07 2.36 6.35 13.77Other cereals & cereal products 1.49 1.63 2.22 2.34 1.31Dairy products 2.52 2.63 2.74 2.03 1.55Processed food 2.00 1.92 1.68 2.28 1.05Beverages 2.45 2.38 1.85 2.57 0.77Other 0.52 0.61 0.41 0.46 0.34

Other Consumer Goods 18.52 19.57 18.77 19.32 13.98Tobacco & tobacco products 0.86 0.78 0.95 0.57 0.30Soap & cosmetics 1.15 1.09 0.50 0.55 0.22Pharmaceuticals 2.84 2.58 3.14 3.62 3.57Books & periodicals 0.70 0.78 0.69 0.68 0.68Textiles 2.92 3.05 2.49 2.22 1.40Rubber products 1.75 2.08 1.99 1.98 1.59Cutlery & household tools 0.28 0.39 0.39 0.29 0.35Electrical equipment 2.21 2.57 2.30 3.41 2.71Cars, motorcycles, etc. 0.51 0.73 0.70 0.77 0.49Other 5.30 5.52 5.62 5.23 2.67

Mineral Fuels & Lubricants 7.37 6.56 8.61 9.55 18.02Crude petroleum 5.08 4.10 5.97 7.34 15.98Petroleum products 2.04 2.25 2.41 2.06 1.88Other 0.25 0.22 0.22 0.15 0.15

Other Intermediate Goods 36.42 31.71 29.87 29.87 32.13Oils & fats (animal and vegetal) 1.08 1.94 1.41 1.69 3.11Textile fibres & tissues 6.38 5.62 5.80 4.57 3.77Plastics 1.92 1.71 1.39 1.53 1.99Fertilizer 1.26 0.67 0.26 0.77 0.60Other chemicals 6.40 4.76 5.05 5.48 7.00Pulp & paper 1.98 1.83 1.58 1.64 1.95Cement 1.06 1.22 0.91 0.87 0.50Iron & steel products 9.26 7.27 7.14 7.10 8.55Other metals & metal products 2.26 2.18 1.97 2.17 1.47Parts for cars, motorcycles, etc. 2.02 1.97 1.88 1.68 1.42Animal feed 0.15 0.21 0.14 0.13 0.05Other 2.65 2.33 2.34 2.22 1.73

Capital Goods 27.29 29.93 31.30 25.22 17.08Machinery 11.69 11.86 13.55 9.22 7.71Electrical machinery 4.05 4.84 5.52 4.79 3.29Transport equipment 9.37 10.71 10.07 9.73 4.85Tools & instruments 2.16 2.51 2.13 1.47 1.22Live animals 0 01 0.01 0.04 0.02 0.02

Source: Table 3.12.

Table 3.14: IMPORTS OF FOOD, BEVERAGES AND RELATED PRODUCTS, 1970-1974

(value c.i.f., in millions of FMG)

1970 1971 1972 1973 1974

Total Merchandise Imports 47.346.2 59,261.7 51,754.5 45,155.3 67.256.9

I. Food 3,762.0 5,839.7 4,868.8 6,085.8 12,120.4

Unprocessed or Semiprocessed- of Animal Orign 1,221.2 1,607.1 1,453.1 934.7 1,073.5

Meat 6.8 11.0 8.1 9.3 3.5

Fish & shellfish 12.4 23.7 15.0 6.5 18.6

Milk concentrate 867.8 1,115.6 938.9 444.2 614.6

Butter 147.6 233.2 288.8 275.0 357.0

Cheese 172.9 205.0 185.5 196.1 65.9

Other 13.6 18.6 17.4 3.4 13.8

- of Vegetal Origin 1.593.5 3,097.7 2,547.1 4,121.3 10,338.5

Rice 667.6 1,820.3 1,223.2 2,869.3 9,259.3

Other cereals 31.0 1.6 22.8 3.3 0.1

Wheat flour 557.2 765.1 1,014.9 870.7 663.6

Malt 48.2 135.8 69.2 114.6 146.4

Other cereal products 70.8 65.7 41.0 70.2 71.1

Tea 20.3 23.7 23.1 29.1 12.4

Hops 37.0 8.4 14.8 32.1 37.9

Other 161.4 277.0 138.1 131.9 147.6

Processed 947.4 1,135.0 868.0 1,029.9 708.4

Meat preparations 156.0 122.9 138.6 143.8 40.9

Fish & shellfish preparations 135.8 191.3 107.8 161.2 116.9

Sugar 104.6 127.8 112.0 116.6 110.8

Cocoa & cocoa preparations 61.3 84.2 63.0 54.4 28.2

Cereal preparations 173.7 212.3 159.8 197.2 176.0

Vegetable & fruit preparations 164.1 188.6 137.1 119.8 62.2

Other 151.9 207.9 149.6 237.0 173.3

II. Beverages 1.161.3 1,409.1 958.5 1,159.0 518.0

Beer 210.1 134.9 62.0 78.9 12.6

Wine 657.6 805.3 540.0 688.6 355.6

Other alcoholic beverages 215.7 368.4 289.9 303.2 96.0

Table & mineral water 55.0 83.3 49.9 61.0 24.5

Soft drinks 4.6 2.9 3.1 3.6 0.2

Vinegar 18.3 14.4 13.6 23.8 29.8

III. Tobacco Products 406.7 460.2 490.0 256.2 201.3

Unmanufactured 96.3 168.0 283.4 101.4 90.8

Manufactured 310.4 292.2 206.6 154.8 110.5

IV. Oils & Fats (Animal & Vegetal) 513.6 1.152.0 728.6 761.9 2,091.5

V. Live Animals./1 3.1 4.9 17.2 7.0 7.1

VI. Animal Feed 68.9 122.2 71.3 60.9 32.1

LI Cattle, pigs, sheep, goats and poultry.


Table 3.15: IMPORTS OF FOOD, BEVERAGES AND RELATED PRODUCTS, 1970-1974

(quantities, in metric tons)

1970 1971 1972 1973 1974

I. Food

Unprocessed or Semiprocessed- of Animal Origin

Meat 15.8 26.2 20.6 23.9 8.7Fish & shellfish 52.7 73.4 33.3 16.7 64.2Milk concentrate 7,088.9 7,620.0 5,611.6 2,158.2 1,897.0Butter 813.3 842.6 695.3 934.0 964.9Cheese 538.2 558.2 437.8 501.2 137.0Other 38.2 43.1 59.1 38.2 53.2

- of Vegetal OriginRice 20,311.8 61,312.1 48,719.3 70,964.3 99,396.2Other cereals 684.3 24.4 650.7 90.7 1.1Wheat flour 23,976.8 27,341.3 34,653.6 24,904.9 10,581.2Malt 1,140.0 2,545.2 1,288.0 1,916.3 1,949.1Other cereal products 1,320.6 1,018.0 824.8 1,267.2 799.7Tea 72.7 74.2 63.5 99.2 35.8Hops 42.4 8.1 15.0 30.5 30.0Other 2,375.8 4,235.7 2,511.7 2,174.0 1,017.0

Processed

Meat preparations 474.2 351.0 391.0 409.8 73.1Fish & shellfish preparationa 622.2 948.8 531.6 787.2 488.0Sugar 837.3 1,054.3 994.8 923.0 1,072.9Cocoa & cocoa preparations 150.7 217.4 151.6 129.8 56.6Cereal preparations 695.5 707.8 523.5 645.2 656.2Vegetable & fruit preparations 1,159.0 1,282.5 882.1 742.3 329.5Other 593.6 618.4 528.7 579.1 367.4

II. Beverages

Beer 2,976.0 1,512.1 676.0 795.4 118.0Wine 12,537.1 13,733.0 9,164.3 10,905.0 4,392.2Other alcoholic beverages 748.2 1,425.9 1,132.4 879.4 271.5Table & mineral water 1,103.4 1,770.4 1,073.8 1,232.0 1,073.7Soft drinks 49.6 27.0 31.1 32.9 1.4Vinegar 342.6 245.3 228.0 376.9 391.1

III. Tobacco Products

Unmanufactured 556.8 946.6 1,366.4 424.3 164.6Manufactured 412.1 382.5 231.9 114.5 65.7

IV. Oils & Fats (Animal & Vegetal) 5,485.1 11,531.4 8,755.5 8,087.8 11,572.6

V. Live Animals 1.1 1.7 16.4 1.0 1.1

VI. Animal Feed 923.2 1,513.8 827.5 485.9 163.2

/1 Cattle, pigs, sheep, goats and poultry.


Table 3.16: PRICE AND QUANTUM INDICES FOR FOOD IMPORTS, 1970-1974

(1970=100)

1970 1971 1972 1973 1974

I. Food Imports, c.i.f. (mill. FMG)- in current prices 3,762.0 5,839.7 4,868.8 6,085.8 12,120.4- in constant 1970 prices 3,762.0 5,453.0 4,263.1 4,262.2 4,458.5

Quantum index 100.00 144.95 113.32 113.30 118.51Price index (FMG) 100.00 107.09 114.21 142.79 271.85Price index (US$) 100.00 107.35 125.76 178.06 313.91

II. Imports of Beverages, c.i.f. (mill. FMG)- in current prices 1,161.3 1,409.1 958.5 1,159.0 518.0- in constant 1970 prices 1,161.3 1,418.2 973.4 955.0 382.0


III. Imports of Tobacco Products. c.i.f. (m.ll. FMG)- in current prices 406.7 460.2 490.0 256.2 201.3- in constant 1970 prices 406.7 453.3 412.6 168.3 81.6


IV. Imports of Oils & Fats, c.i.f. (mill. FMG)- in current prices 513.6 1,152.0 728.6 761.9 2,091.5- in constant 1970 prices 513.6 1,098.9 748.5 717.9 1,021.5


V. Import Price Indices for Selected Commodities /1

- based on prices in FMG:Rice 100.00 92.64 94.35 164.50 328.29Wheat flour 100.00 120.42 126.02 150.44 269.89Butter 100.00 152.55 228.90 162.29 203.95Cheese 100.00 114.30 131.87 121.76 149.70Milk concentrate 100.00 117.68 124.85 113.41 160.46

- based on prices in US$:Rice 100.00 92.87 103.89 205.13 379.08Wheat flour 100.00 120.71 138.76 187.60 311.64Butter 100.00 152.93 252.05 202.38 235.51Cheese 100.00 114.59 145.21 151.84 172.86Milk concentrate 100.00 117.97 137.47 141.42 185.29

/1 These five items together accounted for 64.1 percent of total food imports in 1970 and 90.4 percent in 1974(in current prices).


Table 3.17: IMPORTS OF MINERAL FUELS, LUBRICANrS, AND RELATED MATERIALS, 1970-1974

Volume Value c.i.F., in current prices Value c.i.f., in constant prices of 1970(in metric tons) (in millions of FMG) (in millions of FMt)

1970 1971 1972 1973 1974 1970 1971 1972 1973 1974 1970 1971 1972 1973 1974

1. Coal, coat derivatives, tar, etc. 21,707.8 23,346.6 21,638.7 12,570.1 1J,942.5 117.7 128.4 115.7 68.9 101.8 117.7 11L.4 104,8 60.8 67.4

Coal 20,993.7 23,060.2 21,417.7 12,352.0 13,734.0 90.9 115.5 105.3 58.7 83.9 90.9 99.8 95.9 53.5 59.5Coke & semi-coke 53.7 105.3 64.5 125.4 52.9 1.4 3.4 2.2 4.4 2.3 1.4 2.8 1.7 3.3 1.4Mineral tars 70.3 95.6 102.4 49.9 69.0 2.9 4.6 4.4 3.3 6.8 2.9 3.9 4.2 2.1 2.8Benzole, toluole, xylole, etc. 59.9 30.6 40.3 10.6 19.4 3.6 1.9 2.8 0.9 2.7 3.6 1.8 2.4 0.6 1.2Other products of mineral tar distillation 493.9 34.0 9.4 2.1 55.9 16.8 1.8 0.8 0.2 5.3 16.8 2.8 0.3 0.2 1.9Pitch & pitch coke 36.2 20.7 4.3 29.9 11.4 2.1 1.2 0.2 1.2 0.8 2.1 1.2 0.3 1.0 0.7Gas carbon (retort carbon) 0.1 0.3 - 0.3 . , . , 0.1 - 0.1

2. Petroleum, petroleum fuels & lubricants, etc. 591,581.5 569,818.4 666.0 5 9.0 662,879.9 625,011.4 3,054,8 3,306.0 3,808.3 3,928.7 11,414.9 3,058 2,999,1 3,349.1 3,304.5 2,969.7

Crude petroleum 568,474.4 521,324.2 634,949.7 646,372.8 604,093.7 2,406.2 2,427.9 3,089.1 3,315.1 10,750.5 2,406.2 2,206.6 2,687.5 2,735.9 2,556.9

Aviation spirit 7,403.3 8,504.2 6,200.9 6,385.6 3,065.4 112.3 140.6 103.9 104.0 54.7 112.3 119.9 95.5 98.3 43.3Motor spirit, super 21.7 40.5 658.8 150.5 . 0.7 1.0 7.6 2.8 . 0.7 1.2 19.2 4.5Motor spirit, normal 2,620.6 5,071.0 94.2 - 177.6 22.4 41.3 1.5 - 6.3 22.4 43.1 0.8 - 1.5White spirit 90.2 0.5 10.0 35.7 14.6 4.5 0.1 0.8 3.3 2.4 4.5 . 0.5 1.7 0.7Kerosene 63.3 1,354.8 838.4 386.9 630.1 0.6 12.3 7.9 5.0 19.3 0.6 11.9 7.3 3.4 5.5Motor spirit, mixed 176.4 3.8 1.5 0.3 . 8.9 0.4 0.4 0.1 . 8.9 0.2 0.1Other light petroleum oils 27.0 2.8 0.4 6.6 5.5 1.6 0.1 0.1 0.7 0.4 1.6 0.2 . 0.4 0.3

Gas oil 1,934.6 23,272.8 15,119.4 1,794.5 8,076.9 12.3 165.4 107.6 14.5 141.8 12.3 149.8 96.6 11.4 51.1FPel oil 1,273.7 124.8 97.0 - 4,024.3 5.6 0.6 0.7 - 46.6 5.6 0.5 0.4 - 17.6Lubricating oils 7,915.0 7,415.9 7,480.9 7,729.1 4,575.6 458.2 472.0 475.4 481,5 379.8 458.2 429.3 433.1 447.4 264.9Other heavy petroleum oils 27.6 33.3 6.7 5.7 225.9 3.0 4.3 1.6 1.0 8.7 3.0 3.7 0.7 0.6 24.9

Petroleum gases 48.8 97.3 20.3 12.3 29.9 3.3 6.6 1.7 0.8 1.6 3.3 6.6 1.4 0.8 2.0Petrolesrs coke 1,504.9 2,572.3 580.9 - 92.0 15.4 33.4 10.0 - 2.7 15.4 26.3 5.9 - 0.9

3. Residual petroleum products, etc. 10,641.3 17,408.3 18,932.2 7,582.6 12,079.9 318.5 454.5 530.0 313.2 602.1 318.5 426.0 535.1 254.4 304.9

Petroles Jelly (vaseline) 32.2 86.0 20.8 58.9 76.0 3.2 9.6 3.4 10.1 10.7 3.2 8.6 2.1 5.9 7.6Paraffine sam 4,377.6 3,415.7 4,674.5 3,568.4 3,165.9 230.3 235.4 303.1 214.7 322.3 230.3 179.7 246.0 187.8 166.6Other petroleum waxes 18.8 7.9 27.0 15.4 24.4 4.2 2.5 6.1 3.8 8.7 4.2 1.7 6.0 3.4 5.4Petroleum bitumen /1 6,078.0 10,864.9 9,426.7 3,663.3 8,063.9 72.0 159.8 141.0 70.2 243.2 72.0 128.6 111.6 43.4 95.5Bituminous mastics 24.5 33.2 43.3 43.2 13.9 3.1 4.5 5.1 6.3 3.2 3.1 4.2 5.5 5.5 1.8Bitumen cult-backs & emulsions 92.0 2,994.3 4,719.4 228.9 707.8 3.1 42.3 67.4 7.6 11.5 3.1 102.2 161.1 7.8 24.2Other bituminous mixtures 18.1 6.3 20.6 4.6 28.0 2.5 0.5 3.8 0.5 2.5 2.5 0.9 2.9 0.6 3.9

TOTAL 623.930.6 610,573.3 706,629.9 683,032.7 651.033.8 3,491.1 3,888.0 4454.0 4,310.8 12,118.7 3,491.1 3,536.5 3,989.0 3,619.6 3,342.0

a too small to be shown./1 Includes small amounts of natural bittumen and asphalt in 1971, 1972 and 1973.

Source: INSRE, Statiatiques du Comserce Exterieur de Madagascar, and mission calculations.

Table 3.18: EXPORTS OF MINERAL FUELS, LUBRICANTS, AND RELATED MATERIALS, 1970-1974

Volume Value fob., current prices Value f.o.b., in constant prices of 1970(in metric tons) (in millions of FMG) (in millions of FM)

1970 1971 1972 1973 1974 1970 1971 1972 1973 1974 1970 1971 1972 1973 1974

1. Coal, coal derivatives, tar, etc. A _ 0.4 _ 1.1 0.-7

2. Petroleum, petroleum fuels & lubricants, etc. 3D0.745.9 286.337.4 300.171.0 347.205.7 312.740.9 1,554.6 1,469.8 1,670.9 2.280.4 5642.3 4.6 1.568.0 1,650.7 2,048.8 1.920.8

Crude petroleum _- - -.- - - 0.3 0.5 - -

Aviation spirit 229.2 - - 29.5 1,478.2 3.8 - - 1.2 42.0 3.8 - - 0.3 24.6Motor spirit, super 15,137.3 6,050.2 9,684.7 17,874.4 7,487.5 168.4 67.7 109.5 205.4 216.5 168.4 67.6 108.0 200.2 78.7Motor spirit, normal 30,345.5 30,039.3 26,879.1 30,477.6 33,358.9 349.7 280.9 262.4 305.2 812.2 349.7 348.3 270.6 354.6 387.8White spirit 94.4 117.2 72.0 40.6 163.3 2.9 3.8 2.4 1.0 9.1 2.9 3.6 2.2 1.2 5.0Kerosene 18,571.2 17,795.2 13,712.4 23,240.7 36,045.9 179.0 175.0 139.6 239.6 864.4 179.0 171.5 132.2 223.7 346.9Other light petroleum oils 0.1 0.4 0.1 2.1 - . . . 0.1 - . . . 0.1 -

Gas oil 31,042.1 36,089.9 44, 001.4 65,073.2 59,023.1 226.5 280.4 363.1 634.2 1,216.8 226.5 264.5 322.2 473.8 429.1Fuel oil 204,006.6 172,588.4 178,216.7 190,371.2 164,550.0 611.2 488.4 526.9 660.4 2,182.7 611.2 517.1 533.9 570.3 493.0Lubricating oils 5.4 8.4 11.5 8.1 268.6 0.7 0.9 1.6 0.7 28.8 0.7 1.1 1-5 1.0 34.1Other heavy petroleum oils 1,103.1 23,611.3 20,685.2 12,518.4 5,655.1 9.1 171.8 149.7 100.7 78.7 9.1 193.7 169.7 102.7 46.4

Petroleum gases 211.0 37.2 6,907.8 7,569.8 4,710.3 3.4 0.9 115.8 132.0 191.0 3.4 o.6 110.2 120.8 75.2

3. Residual petroleum products, etc. 2 . 20.0 4.7 o .7 613 0.4 03 0.2 1. 3 . 0.8 0.3 9 0.6

TOTAL 300.745.9 2 7.8 100,17S.7 347.207. 3 312.803.0 1.SS4.6 470.2 1,671.2 2.280.6 5.643.6 1 _ 1.S 68.8 1.651.0 2,049.1 1 .921.5

= too small to be shown.A Includes coal, briquets, mineral tars, coal and tar derivatives, etc.2 Includes petroleum jelly, paraffine wax, bitumen, butuminoua mastics, etc.

Source: INSRE, Statistiques du Commerce Exterieur de MadaRascar, and mission calculations.

Table 3.19: IMPORTS OF CAPITAL GOODS, 1970-1974


1970 1971 1972 1973 1974

I. In current prices (c.i.f.)

Live animals 3.1 5.2 20.8 7.1 11.3Machinery 5,534.0 7,027.7 7,011.6 4,162.6 5,182.5

Electrical equipment /1 1,919.6 2,870.1 2,856.1 2,161.0 2,210.2Tools /1 479.8 597.1 390.3 271.5 226.9Instruments & apparatus /1 545.1 890.2 711.-7 392.1 594.9Transport equipment 4,437.9 6,349.4 5,211.2 4,391.8 3,260.4Rail 228.1 306.9. 234.8 228.3 518.9Road /2 3,525.5 4,346.7 3,736.6 2,241.5 2,619.5Air 407.9 1,050.2 254.9 1,405.9 62.5Maritime & fluvial 276.4 645.6 984.8 516.0 59.4

Total 12,919.6 17,739.8 1 17386.0 11,486. 3

II. In constant 1970 prices (c.i.f.)

Live animals 3.1 4.9 18.9 6.0 8.4Machinery 5,534.0 6,666.9 6,663.0 3,725.4 3,498.6Electrical equipment /1 1,919.6 2,720.2 2,683.0 1,860.2 1,491.9Tools /1 479.8 567.0 367.9 234.9 153.1Instruments & apparatus /1 545.1 842.5 669.5 340.9 401.6Transport equipment 4,437.9 6,033.7 4,889.3 3,944.1 2,201.8

Rail 228.1 290.4 219.9 194.2 350.2Road /2 3,525.5 4,112.3 3,498.7 1,906.1 1,767.6Air 407.9 1,014.6 248.6 1,405.0 43.9Maritime & fluvial 276.4 616.4 922.1 438.8 40.1

Total 12 919.6 16,835.2 15,291.6 10.111.5 7,755.4

III. Import price index, capital goods 100.00 105.37 105.95 112.60 148.11

/1 Excluding consumer durables./2 Excluding passenger cars, motorcycles, etc., and spare parts for such vehicles.

Source: INSRE, Statistiques du Commerce Exterieur de Madagascar, and mission estimates.

Table 3.20: DS8ECTioR8 0F TRADE 1960-1974: EXPORTS

Value f.o.b..L in nillicma of gic In percent of total1960 1965 1970 1971 1972 1973 1974 1960 1965 1970 1974

Total Merhandise Exports 18,484.7 22.632.3 40Q222.2 40.806.9 4186. 475. 58i503.9 100.00 100.00 100.00 100 00

Frace 10,324.1 10,121.7 13,756.3 13,936.7 16,050.7 16,679.0 19,802.5 55.85 44.72 34.20 53.85Usk 2,374.7 6,092.3 9,116.5 9,094.2 8,572.6 7,819.9 12,060.3 12.85 26.92 22.67 20.61Reonion 764.8 1,310.0 4,611.8 3,403.2 3,183.6 3,803.5 4,724.4 4.14 5.79 11.47 8.08Japan 154.8 229.3 1,267.1 1,827.7 1,934.5 2,877.0 3,468.5 0.84 1.01 3.15 5.93Germany, Fed. ReP, of 585.1 1,036.2 1,651.1 1,335.3 1,447.9 1,770.2 2,695.0 3.17 4.58 4.10 4.61

United Kingdnn 474.3 603.2 777. 2 6.41.0 690.9 881.2 1,911.7 2.57 2.67 1.93 5.277Maleyoia 5.2 77.7 2,354.5 2,922.3 1,762.7 2,748.6 1,720.1 0.03 0.34 5.58 2.94Netherlands 129.2 196.0 433.1 141.3 735.4 1,019.7 1,546.5 0.70 0.87 1.08 2.64Italy 234.4 324.1 462.5 832.1 900.8 843 .0 1,301.9 1.27 1.43 1.15 2.23Maoritius, Rodriguez, Diego Garcia 115.2 159.3 464.6 311.1 276.4 322.1 1,129.2 0.62 0.70 1.16 1.93

Conoro Islando 349.1 259.0 846.9 519.6 663.5 53-4. 0 748.9. 1.89 1.14 2.11 1.28Yogosolavia 30.0 33.9 69.7 59.8 23.0 164.9 706.6 0.16 0.15 0.17 1.21Belgi-/cLunemboorg 133.5 180.1 194.6 410.4 259.2 392.5 514.3 0.72 0.80 0.48 0.88Poland 3.8 2.6 48.2 98.8 255.7 64.8 383.9 0.02 0.01 0.12 0.66USSR 16.6 .. 137.2 166.9 562.5 47.7 372.2 0.09 .. 0.34 0.64

3.1garia 30.0 8.4 ... 5.1 .. 308.5 0.16 0.04 .. 0.53Gibraltar ... .1.4 ... 258.2 ... . 0.44Sweden 3.7 10.8 8.5 16.7 6.8 8.3 204.1 0.07 0.05 0.02 0.35China, Peoples. Rep. of 0.1 9.7 ... . 108.5 196.0 . 0.004 . 0.34Spain 11.7 197.5 30.0 140.7 48.0 144.5 172.9 0.06 0.87 0.07 0.30

French Po1yne.ie 20.7 106.9 136.9 60.7 80.4 95.7 171.0 0.11 0.47 0.34 0.79Canada 0.5 84.6 126.3 132.1 126.7 62.5 123.0 0.03 0.37 0.31 0.21Australia 10.9 18.3 80.9 49.6 65.7 84.1 73.3 0.06 0.08 0.20 0.13Nigeria .. 14.9 12.9 26.4 .. 17.3 72.7 .. 0.07 0.03 0.12New Caledonia 5.9 31.6 39.6 32.0 32.5 30.2 72.5 0.03 0.14 0.10 0.12

Morocco 38.2 205.8 38.2 50.9 40.2 40.1 69.6 0.21 0.91 0.09 0.12Switcerland/Liechtenstein 99.6 29.0 9.4 12.8 26.3 121,3 63.5 0.54 0.13 0.02 0.11Senegal 222.6 200.9 607.2 175.9 110.3 114.9 57.0 1.20 0.89 1.51 0.15Dennrk 21.0 65.1 26.5 74.8 108.7 35.6 55.9 0.11 0.29 0.07 0.10Grece 19.9 158.0 60.9 285.3 76.7 141.2 55.2 0.11 0.70 0.15 0.09

Algeria 1,612.7 73.6 334.4 150.8 286.1 212.8 50.8 8.72 0.33 0.83 0.09Martinique/Guadeloupe 107.3 34.0 32.0 90.2 53.9 65.6 39.6 0.58 0.15 0.08 0.07India . 16.3 87.4 63.9 43.9 70.7 35.5 .. 0.07 0.22 0.06Kenya 158.8/1 0.3 72.7 88.3 5.4 8.4 33.6 0.86 . 0.18 0.06Pakistan ... 40.3 123.1 .. 1.6 14.6 .. .. 0.10 0.02

Hong Kong 1.2 11.5 21.7 435.7 69.7 51.9 7.0 0.01 0.05 0.03 0.01runicia 4.2 3.4 12.5.6 11.1 0.3 .1.7 0.02 0.02 0.31Finland 0.5 15.3 .1.3 1.3 131.8 0.7 . 0.07Ivory Caner 0.2 119.9 618.0 638.2 724.4 882.2 0.3 . 0.53 1.54Indoneo ia .. 140.2 11.5 146.0 886.9 225.7 ... 0.62 0.03

R-cnia 46.9 55.3 .. 14.0 151.2 131.8 .. 0.25 0.24 .

Niger ... 33.7 57.4 173.0 93.9 ... . 0.08China, Rep. of 0.1 2.1 27.3 38.0 62.0 76.7 ... 0.01 0.07Canroon 1.4 . 2.5 1.7 0.5 65.6 .. 0.01 . 0.01K-wit ... 18.3 268.6 13.8 .... .. 0.03

Ships: Kalagasy ... 81.6 84.3 111.3 248.6 550.5 .. .. 0.20 0.94French 9.3 10'.7 125.5 184.0 173.2 178.1 850.1 0.05 5.05 0.31 1.45Other 6.3 10.0 155.4 254.1 274.3 457.7 1,025.8 0.04 0.04 0.39 1.75

N-te Special enporto, including re-experts.not avilable.too onall to be show,

/1 For 1960, inclodes all Britioh Root Africa.

Source O NSRE.

Table 5.21: DIRtECTI08N OF TRADE 1960-1974: D58PORTS

Value o.i f., in millien of FtC in percnt of total1960 1965 1970 1971 1972 1973 1974 1960 1965 1970 1974

Total M-rchadiae Imports 27,539.3 344,166.4 4.246.0 59,261.7 51,754.5 4515. i7,256.9 100.00 100.00 100.00 100.00

Franc 19,292.9 21,397.9 25,892.0 33,397.4 28,645 .1 22,138.4 24,094.4 70.06 62.63 54.69 35.82Qat-r. 1,638.1 1,712.8 2,635.0 2,308.5 7,976.5 ... 3.46 11.86ChIna, Peoplia Rep. of 0.7 386.6 ..... 2,431.7 7,041.4 - 1.13 . I 47Ge.ony, Fed. Rep. of 695.6 1,404.8 4,286.5 0.179.3 4,922.3 3,483.0 5,879.7 2.53 4 11 9.05 6.74United States 794.6 1,507.5 2,686.1 2.880.5 2,023.6 3,408.0 4,734.1 2.99 4.41 5.68 7.04

Japan 422.9 510.9 1,294.8 1,324.8 2,301.6 2,034.6 3,323 4 1.54 1.50 2.73 4 94Italy 273.5 645.2 3,799.6 2,373.2 2,002.1 1,380.6 1,579.2 0.99 1.89 5.91 3 35Iraq 1.6 0.5 0.1 0.2 . . 1,443.1 0.01 .2.15

Neth-rlands 644.7 730.3 1,171.0 1,842.8 1,224.6 1,020.2 1,413.6 2.34 2.14 2.47 2.10Saudi Arabia 120.0 4.9 458.7 747.2 213.5 862.5 1,340.5 0.44 0.01 0.97 1.99

United Kingdcs 463.2 403.5 838.9 1,215.0 895.4 719.6 1,136.1 1.68 1.18 1.77 1.69B.Igiwo/Luoeebosa 289.8 378.0 1,044.9 1,151.7 560.4 696.9 1,032.6 1.05 1.11 3.26 1.54Swit-erlad/Liechtenst.in 75.8 74.5 139.1 242.7 508.0 198.0 457.7 0.28 0.22 0 29 0.68K,molt 11.1 .. 309.5 . 27.7 69.1 429.7 0.04 .. 0.65 0.6.4Hong Cong 85.8 192.3 290.1 224.2 200.7 154.2 401.1 0.31 0.53 0.61 0.60

Kenya 2-3. 1/1 163.1 109.7 113.1 104.9 266.5 337.9 0.08 0.48 0.33 0.50Sweden 225.1 192.8 204.7 175.0 90.2 145.7 278.3 0.82 0.56 0.43 0.41Iran 899.1 850.9 222.4 508.1 478.6 130.3 197.0 3.26 2.49 0.47 0.29M--co 280.7 208.1 150.1 525.2 315.6 360.0 196.7 1.02 0.61 0.32 0.29Angoa .1. . 48.1 120.4 188.4 . .0.28

Pakistan 1914.4/ 2 151.5/2 29.9 15.4 49.6 226.1 178.6 0.71 0.44 0.06 0.27HalayoIa 105.1 17.5 53.4 60.2 55.4 161.9 0.31 0.04 0.24New Zealand ... 2.0 1.2 197.5 135.-2 135.4 .... 0.20Egypt .0.1 347.1 .. 25.8 132.4 .. 0.73 0.20Conoro Islando 108.2 71.0 114.6 236.1 119.2 100.9 123.5 0.39 0.21 0.24 0.18

Algeria 436.1 246.5 433.0 242.8 182.9 288.5 108.4 1.58 0.72 0.98 0.18India 182.2 82.9 65.6 33.7 72.3 57.3 117.2 0.66 0.24 0 14 0.17Cana.da 1.6 7,7 12.4 872.0 141.9 122.9 116.9 0.01 0.07 0.03 0.17Tunisia 108.0 135.3 5.7 7.7 22.3 57.5 105.3 0.39 0.40 0.01 0.16Thailand 0.3 1,921.7 65.8 160.5 934.1 79.7 88.9 . 5.62 0.18 0.13

Cano Den ReP. 2.3 39.0 28.8 7.1 31.8 8.0 77.1 0.01 0.11 0.06 0.11Spain 29.0 25.6 68.3 36.5 45.6 54.6 73.5 0.10 0.07 0.14 0.11De,nmark 46.8 59.0 68.6 45.2 96.5 25.0 72.2 0.17 0.17 0.14 0.11Cabon 22.0 30.0 76.8 72.0 62.2 35.6 68.8 0.08 0.09 0.16 0.10Indonesia 0.1 23.3 6.8 40.4 85.8 103.7 58.8 . 0.07 0.01 0.09

Au-tralia 7.0 6.2 82,0 187.5 86.8 120.3 56.9 0.03 0.02 0.17 0.08Bahrain 80.9 181.5 10.2 13.6 78.4 2.2 56.2 0.29 0.53 0.02 0'. 08M.ca.hiqu- 83.4 ... . 13.6 .. 47.3 0.30 0.. .07Masritius, Rodriguec, Diego Garcia 33.1 31.6 44.1 108.8 57.6 69.9 44.4 0.12 0.09 0.09 0.07Auo trio 21.3 17.9 11.2 18.4 33.5 53.7 3.4. 6 0.08 0.05 0.02 0.00

Joocy Coas t 3.6 266.6 106.5 145.6 95.5 165.1 23.2 0.01 0.78 0.22 0.03Reunion 9.4 6.5 18.9 40.6 37.7 92.1 7,5 0.03 0.02 0.04 0.01Blorn 0.2 .. 320.5 .. 389.4 15.5 4.2 . .0.68 0.01South Vietnam 076.7 3.0 2.2 1.2 2.4 1.4 3.6 2.09 0.01 . 0.01B-ociI 4.3 224.4 22.9 1,844.9 161.1 0.4 0.4 0.02 0.66 0.05

S.enega 160.5 670.4 233.2 100.0 44.6 21.7 0.3 0.58 1.96 0.49Tanconi. .. /3 0.1 2.5. 0.1 96.7 0.1,.. 0.01South Africa 155.3 118.0... 796.4 744.3.. 0.56 0.35 ..

China, Rep. of 0.6 40.9 84.8 53.6 182.7 60.3 . 0.02 0.18Paraguay 7.5 .46.5 94.9 122.7 40.1 .. 0.03 . 0.10

coo small to be shown.not -voilable.

/I For 196i, includes all British goast Afric..712 For 1960 and 0965, Includes Bongladeoh.73 For 1960, show with all British East Africa under Kenya.

Source: 11NSR0.

Table 3.22: REALIZED EXPORT PRICES FOR SELECTED PRODUCTS, 1960-1974

(f.o.b.; F?C per kg)

1960 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

Food cross

Coffee 144.65 142.48 166.33 162.76 163.63 166.81 210.53 208.47 207.05 203.36 238.61Vanilla 6,090.39 2,476.95 2,503.14 2,509.49 2,632.78 2,747.29 2,963.78 3,074.11 3,144.10 3,079.41 3,307.86Cloves 166.08 168.13 171.72 166.48 157.61 418.00 889.86 765.35 687.83 650.31 790.57Pepper, green 171.97 384.84 493.03 669.73 674.81 790.45 803.37 506.90 493.54 433.70Pepper, black 330.17 222.91Pepper, other 213.46 1234.17 178.38 157.41 156.07 225.46 245.42 214.72 236.44 340.16

Cocoa 153.54 102.76 115.18 133.36 170.75 242.32 178.21 128.02 132.76 227.48 367.37Cinlamon 79.97 114.58 120.55 137.00 150.56 200.97 137.13 145.14 151.90 182.75 204.52Rice, de lone 60.38 67.56 65.45 67.17 72.67 79.87 82.04 88.07 86.19 90.13 168.46Rice, other /1 41.34 38.51 34.81 39.33 37.89 37.74 35.77 38.14 38.36 47.13 54.98Maize 14.00 15.47 15.50 15.00 14.42 14.85 17.60 17.39 15.38 18.71 35.66

Lina beans (poti do cap) 37.23 36.62 32.99 41.78 48.25 56.66 57.52 44.91 45.14 42.68 83.00Beans, dry 47.72 64.62 53.68 56.69 62.16 65.46 73.48 70.20 69.51 58.92 89.30Lentils 113.04 108.98 122.26 132.21 120.71 80.69 77.66 109.20 117.95 149.15 155.44Cass.va 11.90 14.42 14.31 12.02 11.67 12.57 13.69 16.39 13.99 15.12Bananas, fresh 15.92 12.08 12.13 12.25 12.80 17.13 19.24 20.86 24.18 34.68 35.53

Other osric-ltoral raw naterilas

Tobacco, raw 238.05 226.06 224.74 220.08 154.72 195.10 207.81 204.90 232.86 244.42 279.42.ro.nd.ots 57.44 65.56 74.26 64.01 59.30 64.03 72.15 70.05 71.91 70.95 84.57

Cotton, raw 148.73 169.67 - 256.41 - 86.41 157.74 167.79 236.24 -

Cotton, linters - 44.50 43.65 44.86 46.45 21.19 50.68 23.45 24.54 20.72 25.90Sisal 54.13 46.72 41.72 35.79 29.91 35.41 33.97 34.39 37.03 66.16 120.89Raffia 123.16 102.32 120.78 127.05 117.53 99.02 89.94 98.49 101.08 116.05 159.62

Pracess.d ricoltoral prodocts

Meat (fresh, chilled, frozen) 192.34 210.66 204.21 196.82 187.16 194.71 227.54 241.63 292.74 363.11 386.59Meet preparations 218.25 253.85 253.02 237.93 260.05 255.78 283.29 351.73 341.22 365.48 381.61Fish 93.97 134.69 134.38 125.64 103.71 123.45 127.76 143.17 118.75 84.83 108.31Crostac..ne, .ollosIs 99.19 288.68 208.35 138.49 227.63 316.92 384.47 423.78 463.04 585.40 670.29Sagar 33.41 33.23 16.55 27.86 28.10 26.66 30.94 32.90 39.97 42.22 126.94Tapioca 41.64 42.86 42.81 46.83 47.87 47.00 51.24 51.50 15.84 64.57 77.76Essential oil of clooss 510.42 395.55 449.33 505.80 624.54 763.13 716.69 757.21 758.47 963.56 1,776.42

Mineral prodocts

Chrooite - 3.35 . - - 6.24 6.53 8.08 7.15 5.84 8.88Craphite 22.16 25.74 27.05 26.69 27.24 27.49 32.02 34.08 36.17 36.90 47.30Mica 288.07 253.50 269.85 255.19 214.17 168.33 258.06 202.40 220.47 188.40 180.77

. exports too stuall to be significant./1 Eacloding broken rice.

Soorce: INSRE, Statitiq.es du Comserce Extdrieur de Mdagascar.

Table 3.23: EXPORT PRICE INDICES

FOR SELECTED PRODUCTS AND PRODUCT GROUPS, 1970-1975

(based on export prices f.o.b. in U.S. dollars)

1970 1971 1972 1973 1974 1975P

Total merchandise exports 100.00 99.68 112.49 132.16 158.10 166.20

Agricultural commodities 100.00 96.85 105.48 119.90 139.86 ..Coffee 100.00 99.26 108.29 120.45 130.87 135.50

Vanilla 100.00 103.98 116.81 129.57 128.88 151.90Cloves 100.00 86.22 85.11 91.13 102.59 99.00

Pepper (green) 100.00 101.88 70.61 77.86 63.36Pepper (other) 100.00 109.12 104.87 130.78 174.22 162.20

Cocoa 100.00 73.62 82.04 159.18 238.04 181.40

Cinnamon 100.00 106.09 121.97 166.18 172.21Rice, de luxe 100.00 107.62 115.68 137.01 237.13 206.70

Rice, other 100.00 102.60 113.35 160.53 170.37Groundnuts 100.00 97.32 109.74 122.63 135.35

Lima beans (pois du cap) 100.00 78.27 86.41 92.53 166.63 236.50Beans (dry) 100.00 95.76 104.16 99.98 140.33 264.40Bananas (fresh) 100.00 108.71 138.42 224.82 213.26Tobacco 100.00 98.84 123.38 146.67 155.26Sisal 100.00 101.48 120.01 242.86 410.88 352.70

Seed cotton 100.00 106.64 * 186.76 -

Raffia 100.00 109.77 123.75 160.90 204.93Rosewood 100.00 89.13 129.04 141.85 155.94

Livestock products 100.00 107.95 141.93 184.95 168.97 ..

Live animals - cattle 100.00 107.32 163.70 345.85 388.03Live animals - pigs 100.00 116.13 128.25 150.62 147.88Live animals - sheeps & goats 100.00 109.47 164.67 258.43 261.89

Meat (fresh, chilled, frozen) 100.00 106.45 141.66 199.00 196.18 332.20Fish 100.00 109.52 102.34 82.80 98.02 102.00

Crusteaceans & molluscs 100.00 110.49 140.79 189.87 201.31Crocodile skins 100.00 90.48 159.12 185.19 152.73Other hides & skins (raw) 100.00 110.23 166.30 286.12 192.31Beeswax 100.00 97.60 92.14 103.79 148.46

Petroleum products 100.00 93.95 111.46 138.79 339.16 436.60

Other mineral products 100.00 109.79 117.51 118.25 142.68 ..

Chromite 100.00 124.07 120.55 111.57 157.03 296.70

Graphite 100.00 106.68 124.36 143.70 170.56 259.20Mica 100.00 78.62 94.07 91.04 118.52

Quartz 100.00 113.53 190.29 265.97 240.65

Metals & metal products 100.00 104.61 106.51 137.82 147.50 ..Copper 100.00 68.45 67.43 81.50 118.53

Other manufactured goods 100.00 106.41 125.75 154.64 181.59 ..

Sugar 100.00 106.61 142.47 170.17 473.76 500.70Tapioca 100.00 100.75 120.00 157.15 175.24Meat preparations 100.00 107.25 126.11 155.88 158.67 175.40

Essential oil of cloves 100.00 105.91 116.53 167.66 286.21 238.00Essential oil of ylang ylang 100.00 98.09 111.67 144.15 173.24

Tobacco products 100.00 99.51 110.97 139.26 125.33Cotton threads & tissues 100.00 101.14 102.13 106.13 95.65Textile clothing 100.00 104.85 123.22 112.65 120.02Shoes 100.00 117.97 125.89 158.07 163.66Leather 100.00 107.25 131.51 192.88 168.68

p * provisional.*. exports too small to be significant.

not available.


Table 3.24: FOREIGN TRADE INDICES, 1970-1975

(1970 * 100)

1970 1971 1972 1973 1974 1975

Merchandise Exports

Export value index (FMG) 100.00 101.45 104.08 111.26 145.45 176.87P

Export value index (US$) 100.00 101.70 114.61 138.74 167.96 229.18P

Export quantum index 100.00 102.03 101.88 104.98 106.24 137.90P

Export price index (FMG) 100.00 99.43 102.16 105.98 136.91 128.25P

Export price index (US$) 100.00 99.68 112.49 132.16 158.10 166.20P

Merchandise Imports

Import value index (FMG) 100.00 125.17 109.31 95.37 142.05 174.04P

Import value index (US$) 100.00 125.47 120.36 118.93 164.03 225.51P

Import quantum index 100.00 120.96 102.68 80.55 73.54 90.20P

Import price index (FMG) 100.00 103.48 106.45 118.40 193.16 192.95P

Import price index (US$) 100.00 103.73 117.22 147.64 223.05 250.OOP

Terms of Trade Index 100.00 96.09 95.97 89.52 70.88 66.47P

For comparison:Import price index (US$)

- Worl'' I 100.00 106.00 113.00 138.00 197.00 214.00

- Developing countries/2 100.00 103.00 111.00 138.00 201.00 215.00

Terms of trade index,- Low income developing countries/3 100.00 97.40 96.30 98.30 87.10 80.80

p a provisional mission estimates.

/1 Source: IFS./2 Excluding oil exporters. Source: IFS./3 Source: IBRD.


Table 4.1: EXTERNAL PUBLIC DEBT OUTSTANDING, 1965-1975, BY SOURCE

(End of year; thousands of U.S.$)

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

I. External Public Debt (Disbursed), total 75 286 8 044 89 279 8817034 92 869 89 3167.875

Suppliers' credits, total 4,480 4,278 3,395 5,757 4,995 4,30 3,467 2 766 3.276 4,194 3,846

France 4,480 4,278 3,395 2,513 1,450 755 52 - - - -

Germany, red. Rep. of - - - 3,244 3,545 3,545 3,415 2,766 3,276 3,676 3,377

Kuwait - - - - - - 518 469

Private bank credits, total 389 306 244 152 2,653 5,001 5,397 4,5172 3,887

Germany, Fed. Rep. of - - 389 306 244 152 68 13 - - -

Italy - - - - - - 2,585 4,988 5,397 4,572 3,887

Privately placed bonds, total - - 4,051 3.433 32614 3,640 3,492 3,563 3,491 3,147

France - - - 4,051 3,433 3,614 3,640 3,492 3,563 3,491 3,147

Loans from international organizations, total _ - 371 2,171 5,071 11,445 17,029 22,467 38,477 51,501 80,027

European Development Fund - - - - - - - - - 773 2,180

IBRD - - - 192 220 1,576 4,863 6,996 10,501 10,626 23,648

IDA - - 371 1,979 4,851 9,869 12,166 15,471 27,97b 40,102 54,199

Loans from Movernments, total 70,806 75,868 76,889 76,994 74,291 73,358 80,607 55,586 64,579 22-4.5 7fi-968

China, People's Rep. of - - - - - - - - 4,386 7,386 6,936

France 64,835 65,578 64,948 64,991 59,008 58,063 61,779 35,265 37,029 37,082 33,461

Germany, Fed. Rep. of 5,971 10,087 11,701 11,361 12,049 11,224 12,669 13,495 17,882 21,775 21,563

Israel - 203 203 203 1,203 1,136 949 949 881 881 881

Japan - - - - - - - - - 1,585 8,025

South Africa - - - - - - 1,372 1,699 - - -

USA - - 37 439 2,031 2,935 3,838 4,178 4,401 4,747 6,102

II. External Public Debt (includin~ undisbursed? 2total 85 020 99 116 106 415 139,870 143,688 201856 32,319 234 965

Suppliers' credits 4,480 4,278 3,395 5,757 4,995 4,300 3,467 2,766 3,276 4,194 3,846

Private bank credits - - 389 306 6,244 6,152 6,383 6,184 5,397 4,572 3,887

Privately placed bonds - - - 4,051 3,433 3,614 3,640 3,492 3,563 3,491 3,147

Loans from international organizations - 10,000 14,800 22,800 27,462 42,062 42,222 58,608 92,532 121,396 126,896

Loans from governments 80,540 84,838 87,831 88,684 82,377 83,742 87,976 77,863 97,088 98,666 97,189

Note: Data include public debt and publicly guaranteed private debt, with an original or extended maturity of over one year, repayable in foreign currency or in goods. Debt

outstanding includes principal in arrears, but excludes interest in arrears.

Source: IBRD, External Debt Reporting System.

Table 4.2: EXTERNAL PUBLIC DEBT: DISBURSEMENTS 1965-1975

(in thousands of U.S. dollars)

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Suppliers' credits /1 4,104 3,246 _ _ _ 512

Private bank credits /2 430 - - 2,479 2616 1,182 -

Privately placed bonds /3 4,051 - 360 - - - -

Loans from international organizations 371 12,900 6,374 5,584 4,352 14,109 128,51European Development Fund - - - - - - - - - 759 1,495IBRD 192 28 1,356 3,287 2,133 3,505 125 13,022IDA - - 371 1,608 2,872 5,018 2,297 2,219 10,604 12,126 14,097

Loans from governments 7,340 7,235 4,436 4,233 7,021 3,135 6947 5 10.890 12 695China, People's Rep. of _ _- - - - - - 4,460 2,467 33France 4,110 2,916 2,785 3,671 4,265 2,231 3,654 3,031 3,218 2,415 1,719Germany, Fed. Rep. of 3,230 4,116 1,614 160 168 - 920 1,488 2,991 2,705 2,942Israel - 203 - - 1,000 - - - - - -Japan - - - - - 1,635 6,646South Africa - _ - _ _ - 1,469 348 - - -USA - - 37 402 1,588 904 904 339 221 346 1,355

Disbursementsl total 11,444 7235 5,237 13,330 9,921 9,869 15,010 23,090

/1 1965: France; 1968: Fed. Rep. of Germany; 1974: Kuwait./2 1967: Fed. Rep. of Germany; 1971-1973: Italy._3 1968, 1970: France.

Source: 1BRD (Debtor Reporting System).

Table 4.3: SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT, 1965 - 1976

(in thousands of U.S. dollars)

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976P

Amortization Payments, total 2,097 2,393 4,349 5,096 4,531 4,996 6.40 6,204 8,809 6,251 7,266 8.325

Suppliers' credits 96 203 883 883 782 694 1,229 778 - - 41 1,276Private bank credits - - 42 84 82 91 96 323 552 479 480 377Privately placed bonds - - - - 157 169 188 222 252 263 327 3-93Loans from international organizations - - - - - - - - - - - 208Loans from governments 2,001 2,190 3,424 4,129 3,510 4,042 4,627 4,881 8,005 5,509 6,418 6,071

Interest Payments, total 945 1,245 1,558 1,699 1,655 1,923 2,582 2,235 3,282 3,301

3.898 4,679

Suppliers' credits - 17 143 176 115 18 142 - - - 17 128Private bank credits - - 20 27 20 15 98 203 296 241 218 186Privately placed bonds - - - - 218 200 199 227 239 201 221 212Loans from international organizations - - - 2 57 133 293 72 839 1,063 1,359 2,107Loans from governments 945 1,228 1,395 1,494 1,245 1,557 1,850 1,733 1,908 1,796 2,083 2,046

Total Service Payments 3,042 3,638 5907 6795 6 6,919 8 722 8,439 12,091 1 11413.004

Debt Service Ratio- 2.6 2.9 4.4 4.6 3.5 3.4 4.1 3.7 4.9 33 2 8e 3 . 6e

p - projected.e - preliminary estimate./1 Total external public debt service payments as percentage of total exports of goods and non-factor services.

Source: IBRD (Debtor Reporting System).

Table 4.4: FOREIGN AID COMMITMENTS, 1973-1975/1


Source 1973 1974 1975

Bilateral

China, People's Rep. of 5.6/2 - 57.1France (CCCE) 3.9 3.9 7.6France (FAC) 0.6 0.6 2.7Germany, Fed. Rep. of - - 4.4Japan 18.5 - _Kuwait - 0.5Netherlands - 0.7United States 1.2 - -

Bilateral, total 29.8 5.7 71.8

Multilateral

Arab League - 4.8 -European Development Fund 25.0 16.1/3 -FAO - - 1.0World Bank Group - IBRD 15.0 6.8 -World Bank Group - IDA 16.8 22.4 5.6U.N. Emergency Fund - 1.0 3.3

Multilateral, total 56.8 51.1 9.9

Total Foregin Aid Commitments 86.6 56.8 81.7

/1 No distinction is made in this table between loans, credits,subsidies and grants.

/2 Interest-free loans as food aid (rice imports)./3 All grants, of which U.S. $ 3 million as food aid and U.S.

$ 3 million as import subsidy.

Source: UNDP, Tananarive.

Table 5.1: CENTRAL GOVERNMENT CURRENT REVENUES \ND EXPENDITURES, 1970-1975


1970 1971 1972 1973/ 1974 1975P

A. Current Revenues

Tax revenues 35,527 41,460 38,495 40,727 44,466 48,853

Direct taxes 6,598 6,889 6,493 9,295 8,225 9,255

Indirect taxes 28,929 34,571 32,002 31,432 36,241 39,598Consumption taxes 4,869 5,788 5,582 6,113 6,394 6,552Value added & turnover taxes 6,784 7,699 7,242 7,370 8,949 10,224Import taxes & duties 11,163 13,733 12,282 11,084 12,137 14,367Export taxes & duties 2,063 2,365 2,444 2,878 3,071 5,508Other indirect taxes 4,050 4,986 4,452 3,987 5,690 2,947

Non-tax revenues 3,294 2,806 3,650 4,902 4,939 4,084

Total current budget revenues 38 821 44,266 42,145 45,629 49,406 52,937I I I , I lls _______: __a

B. Current Expenditures

Wages & salaries 15,394 16,789 17,937 24,026 26,960 29,231Goods & services 10,915 11,310 10,904 9,081 9,054 10,888Transfers & subsidies 3,230 3,615 6,587 62525 5,717 6 105/3/2 ' /2 ~~~/2 __3 /3 1 45Public debt service 1,298/- 2,123/- 2,110 - 856L- 960- 1,245 -

Total current budget expenditures 30j837 33,837 37,538 40,487 422961 47,469

C. Current Budgetary Surplus 7,894 10,429 4,607 5,142 6,445 5,468

p = provisional./1 Beginning with FY 1973, the provincial budgets have been absorbed into the central government budget./2 Includes some amortization payments.73 Interest payments only.


Table 5.2: CENTRAL GOVERNMENT CAPITAL EXPENDITURES, 1973 - 1975


1973 1974 1975Budget Actual Budget Actual Budget Actual

Transport & public works 9,879 6,733 7,754 5,512 6,853

Agriculture & rural development 4,238 4,766 7,233 4,828 4,486

Education 200 201 1,712 908 587

Health 334 181 564 363 390

Defense 67 177 184 166 507

Other 2,940 2,436 3,544 1,552 2,762

Total 17,659 14,494 20,992 13,329 15,585 132090

Current Budget Surplus 3,971 5,142 6,075 6,445 5,045 5,468

Overall Deficit 13,688 9,352 14,917 6,884 10,540 7,622

= not available./1 projected.7- provisional.

Source: Ministry of Finance and Flanning.

Table 5.3: FINANCIAL OPERATIONS OF THE TREASURY, 1971-1975i/

(millions of FMG)

1971 1972 1973P 1974P 1975P

Current budget revenue 43,826 42,744 46,336 51,549 53,699

Current budget expenditure -33,712 -37,348 -40,885 -41,862 -44,571

Current budget surplus 10_114 5.396 _5 451 9687 9 128

Capital budget expenditure -12,763 -15,951 -13,918 -13,595 -13,083

Rice subsidy /2 - - -2,783 -6,349 -4,028

Other treasury operations (net) -930 -1,681 -974 -1,362 -2,471Deferred payments -200 3,385 1,594 -870 104

Overall treasury deficit 3779 -8,851 2 -10,350

Financing

Foreign sourcesBudgetary grants 1,000 1,146 - - -Loans 2,143 1,774 3,992 3,877 5,658

Domestic sourcesCommercial banks - 833 4,430 754 5Central bank /3 -2,572 4,076 3,206 7,949 7,657Other borrowing 76 290 723 -98 -198Changes in deposits with theTreasury /4 3,912 -805 249 -1,047 -347

Changes in other liquid assets -780 1,537 -1,970 1,054 -2,425

p m provisional./1 Treasury data differ from the Budget Directorate data (Tables 5.1 and 5.2) owing to

lags between "ordonnancements" and "paiements" and to other adjustments./2 Rice subsidy financed by the Central Bank on behalf of the Treasury, but not re-

corded in the Treasury accounts./3 Central Bank data; include advances for rice subsidy./4 Mainly deposits of Commodity Stabilization Funds and Postal System.

Source: Ministry of Finance and Planning, Situation Resumee des Opirations du Tresor1971 (definitive), 1972 (definitive), 1973 (avant-definitive), 1974 (provisoireNo. 2) and 1975 (provisoire No. 1); and IMF.

Table 5.4: FINANCIAL SITUATION OF THE

MARKETING BUREAUS AND STABILIZATION FUNDS, 1970-1975

(end of period; millions of FMG)

1969/70 1970/71 1971/72 1972/73 1973/74 1974/75

Ca3sava Fund (C.S.P.M.)Operating funds 6.68 9.43 4.65 6.01 5.25 4.60Reserves 30.00 15.00 15.00 15.00 15.00 10.00

Candlenut Fund. (C.S.P.A.)Operating funds 6.48 6.80 6.08 4.77 4.17 0.70Reserves - - - - _ _

Cloves Bureau (B.C.S.G.)Operating funds 4,560.11 4,331.45 3,740.78 1,388.95 1,102.02Reserves 1,500.00 1,500.00 1,488.00 1,488.00 1,488.00

Coffee Fund (C.S.P.C.)Operating funds 1,843.31 1,344.07 973.61 1,179.71 709.66Reserves 1,307.69 1,307.69 542.69 551L92 551.92

Cotton Fund (C.S.P.C.)Operating funds 15.98 58.00 100.93 40.35 59.57 198.30

Reserves - - - 50.00 50.00 50.00

Groundnuts Bureau (B.C.S.A.)Operating funds 5.67 8.58 9.53 32.44 65.87 12.30Reserves - - - - - -

Pepper Bureau (B.C.S.P.)Operating funds 39.17 123.20 97.35 139.06 180.11 235.60

Reserves - - 100.00 100.0 100.00 100.00

Price Equalization Fund (F.N.P.P.)Operating funds 195.00 202.15 33.55 34.51 15.01Reserves - - 150.00 150.00 175.00

TotalAOperating funds 6,672.40 6,083.68 4,966.48 2,825.80 2,141.66Reserves 2,837.69 2,822.69 2,295.69 2,354.92 2,379.92

/1 Excluding stabilization funds for vanilla and sugar, for which data are not available.Note: C.S.P. * Caisse de Stabilisation des Prix

B.C.S. * Bureau de Commercialisation et de Stabilisation des PrixF.N.P.P.a Ponds National de Pir6quation des Prix de Marchandises

Source: Marketing Bureaus and Stabilization Funds; Treasury.

Table 5.5: RECEIPTS AND EXPENDITURES OF TBE THREE SOCIAL SECURITY SCHEMES, 1972-1975


1972 1973 1974 1975PRec. Exp. Rec. Exp. Rec. Exp. Rec. Exp.

Family allowances 2.31 2.08 2.43 2.31 2.59 2.23 2.54 2.24

Workers' health & accident insurance 0.38 0.23 0.40 0.24 0.42 0.30 0.48 0.40

Retirement benefits 0.78 0.11 0.80 0.19 0.83 0.26 0.92 0.47-

Total 3.47 2.42 3.63 2.73 3.85 2.79 3.94 3.10

p - preliminary.

/1 In 1975, CNaPS began paying pensions to voluntary subscribers; hence the increasein expenditures.

Source: CNaPS.

Table 6.1: MONETARY SURVEY, 1970-1975

(in millions of FMG; end of year)

1970 1971 1972 1973 1974 1975

Foreign Assets (net) 1605 16,044 19,32' 21,828 18,983 12,261

Foreign assets (gross) 19,429 18,271 21,947 24,537 23,662 18,159Central Bank 10,311 11,840 13,557 15,380 11,060 7,971

-Treasury 3,079 3,043 3,282 3,606 2,35B 1,628Deposit money banks 6,039 3,388 5,108 5,551 10,278 8,560

Foreign liabilities 2,824 2,227 2,618 2,709 4,679 5,898Central Bank 2 1 377 126 3,228 4,300Deposit money banks 2,822 2,226 2,241 2,584 1,451 1,598

Domestic Credit 44,855 50.584 56,784 55,526 74,971 85,084

Claims on government (net) -7,930 -9,069 -2,669 -4,246 4,961 12,604Central Bank claims on government (gross) -3,079 -3,043 -1,836 -710 10,246 17,160(-) Government deposits at the Central Bank 2,547 5,046 2,241 1,232 3,266 2,146Deposit money banks' claims on government (gross) 2,628 3,393 5,358 5,685 8,500 9,721(_) Government deposits at deposit money banks 5,013 4,086 4,661 8,045 10,490 11,454(-) Treasury claims on the private sector |1 4,048 4,663 3,789 3,936 4,442 5,508Post Office checking deposits 1,998 1,980 1,952 2,154 1,873 2,045Demand deposits at the Treasury 2,131 2,396 2,548 1,838 2,540 2,786

Claims on the private sector 52,785 59,653 59,453 59,772 70,010 72,480Deposit money banks' claims on the private sector 48,737 54,990 55,664 55,836 65,568 66,972Treasury claims on the private sector /1 4,048 4,663 3,789 3,936 4,442 5,508

TOTAL (Assets = Liabilities) 61,460 66A628 76,113 7791 5

Means of Payment (= MH) 55.162 58,548 65,443 67,799 81,161 82,299

money (= M1) 46,195 46,949 53,335 56,581 66,916 67,931Currency outside banks 22,523 22,246 25,381 26,284 30,838 32,571

Notes and coins in circulation 23,841 23,516 26,677 27,506 33,310 35,017(-) Currency in banks 280 278 429 387 468 300(-) Currency in the Treasury 1,038 992 867 835 2,004 2,146

Demand deposits 23,672 24,703 27,954 30,297 36,078 35,360Demand deposits of deposit money banks 19,543 20,327 23,454 26,395 31,665 30,529Post Office checking deposits 1,998 1,980 1,952 2,154 1,873 2,045Demand deposits at the Treasury 2,131 2,396 2,548 1,838 2,540 2,786

Quasi-money (time deposits) 8,967 11,599 12,108 11,218 14,245 14,368

Other Items (net) 6,298 8,080 10,670 9,555 12,793 15,046

Deposit money banks' credit from the Central Bank 17,228 19,614 17,951 14,577 19,240 18,768(-) Central Bank claims on deposit money banks 17,246 19,511 18,016 14,486 19,106 18,870

Short-term claims 13,382 14,632 12,440 10,558 15,626 16,106Long-term claims 3,864 4,879 5,576 3,928 3,480 2,764

Capital accounts 5,542 6,709 7,887 8,806 11,183 11,565Central Bank 2,417 3,362 4,186 5,043 5,970 6,175

of which: Allocation of SDRs 886 1,659 2,424 2,424 2,424 2,424Deposit money banks 3,125 3,347 3,701 3,763 5,213 5,390

Other items (net) 774 1,268 2,848 840 1,476 3,583

fL Secured commercial bills and notes accepted by the Treasury as payment of indirect taxes and customs duties.

Source: Central Bank and [MF.

Table 6.2: DISTRIBUTION OF CREDIT TO THE PRIVATE AND PARASTATAL SECTORS

BY ECONOMIC ACTIVITY, 1970-1975

(credit outstanding, end of year; in billions of FMG)

1970 1971 1972 1973 1974 1975

Short-term credit

Agriculture (including livestock and fishing) 7.67 8.34 8.43 8.45 13.48 11.56Mining 0.40 0.19 0.25 0.48 0.30 0.33Processing of agricultural products 3.26 5.01 4.65 4.69 5.73 7.47Textile industries 2.72 2.69 2.66 2.45 3.25 3.62Other manufacturing industries 6.91 7.68 8.13 6.75 8.14 9.12Public works and construction 0.45 0.32 0.63 0.79 0.85 0.53Commerce 14.06 14.46 13.27 14.18 17.27 15.06Other 0.79 0.67 0.98 0.81 1.06 1.01

Short-term credit, total 36.26 39.36 39.00 38.60 50.08 48.70

Medium-term credit


Medium-term credit, total 5.78 7.63 8.77 8.05 7.50 6.80

Long-term credit /1

Agriculture (including livestock and fishing) 0.70 0.59 0.79 0.77 0.82 0.61Mining 0.56 0.55 0.58 0.51 0.53 0.44Processing of agricultural products 0.13 0.14 0.10 0.09 0.11 0.10Textile industries 0.29 0.83 0.84 0.85 0.85 0.83Other manufacturing industries 1.74 1.53 1.49 1.21 1.08 0.69Public works and construction - - - - - -Commerce 0.10 0.07 0.12 0.14 0.11 0.07Other 0.91 0.93 1.10 1.08 1.03 0.90

Long-term credit, total 4.43 4.64 5.02 4.65 4.53 3.64

lotal Credit Outstanding /2 46.47 51.63 52.79 51.30 62.11 59.14

/1 Extended entirely by the BNM./2 Excluding credits of less than FMG 5 million, credits under litigation, and advances

to the Government and to foreign administrations.

Note: Totals may not add, due to rounding.

Source: BCRM, Bulletin Mensuel de Statistiques (No.2), July 1976.

Table 6.3: DISTRIBUTION OF CREDIT TO THE PRIVATE AND PARASTATAL SECTORS

BY ECONOMIC ACTIVITY, 1970-1975

(credit outstanding, end of year; in percent of total)

1970 1971 1972 1973 1974 1975

Short-term credit


Short-term credit, total 100.0 100.0 100.0 100.0 100.0 100.0

Medium-term credit


Medium-term credit, total 100.0 100.0 100.0 100.0 100.0 100.0

Long-term credit

Agriculture (including livestock and fishing) 15.8 12.7 15.7 16.6 18.1 16.8Mining 12.6 11.9 11.6 11.0 11.7 12.1Processing of agricultural products 2.9 3.0 2.0 1.9 2.4 2.7Textile industries 6.5 17.9 16.7 18.3 18.8 22.8Other manufacturing industries 39.3 33.0 29.7 26.0 23.8 19.0Public works and construction - - - - - -Commerce 2.3 1.5 2.4 3.0 2.4 1.9Other 20.5 20.0 21.9 23.2 22.7 24.7

Long-term credit, total 100.0 100.0 100.0 100.0 100.0 100.0

For notes and sources, see Table 6.2.

Table 6.4: INTEREST RATE STRUCTURE

(in percent per annum)

Effective EffectiveNov. 17, 1969 Oct. 1, 1974

I. Central Bank rates

A. Short-term credit operationsRediscount of:short-term paper - 5.50export bills 4.00 4.00bills secured by products under

contract with Stabilization Funds 4.75 4.75Advances 6.50 - 8.50 6.50 - 8.00

B. Rediscount of medium-term paper 3.75 5.00

C. Rediscount of long-term paper - 6.00 /1

II. Commercial bank rates on credit operations /2

A. Credit secured by:local commercial paper 6.75 - 8.00 6.75 - 8.00government contracts 6.75 - 8.50 6.75 - 8.50

stocks of coffee 6.75 - 7.25 6.75 - 7.25stocks of other crops 7.125 - 9.25 7.125 - 9.25stocks of other merchandise 8.00 - 9.25 8.00 - 9.25

B. Overdrafts 8.00 - 9.25 8.00 - 9.25

Minimum depositIII. Commercial bank rates on deposits (in thousands of FMG)

A. Sight depositsPrivate sector deposits 0.75 0.75Public sector deposits 3.00 3.00Insurance companies deposits - 3.00 3.00

B. Time depositsAt least 2 months 75,000 4.90 4.90At least 3 months 50,000 4.75 4.75From 6 months to less than 1 year 500 4.60 4.75From 1 year to less than 2 years 300 5.15 5.65From 2 years to less than 30 months 300 6.15 6.80

C. Certificates of depositFrom 6 months to less than 1 year 500 3.60 3.70From 1 year to less than 2 years 50 4.00 4.25From 2 years to less than 3 years 50 4.75 5.30From 3 years to less than 4 years 50 5.10 5.80From 4 years to less than 5 years 50 5.30 6.80From 5 years to less than 6 years 50 5.50 7.50

/1 Rediscounting of long-term credit was introduced on August 28, 1974./2 Refers to credit that is rediscountable with the Central Bank; non-rediscountable credit bears, on the

average, a rate that is 0.75 to 2 percentage points higher.

Source: Central Bank.

Table 6.5: INTERNATIONAL LIQUIDITY, 1970-1976

(in millions of U.S.$; end of period)

1970 1971 1972 1973 1974 1975 1976March June Sept. Dec. March June Sept.

International Reserves 37.1 46.3 52.2 67.9 49.4 53.1 32.1 34.6 35.6 58.6 66.8 50.8

SDRs 3.2 6.5 9.5 10.5 0.2 - 0.5 0.2 1.1 0.8 0.1 1.0

Reserve position in the IMF 5.0 5.5 5.5 6.1 - - - - - - - -

Gold and foreign exchange 28.9 34.4 37.3 51.3 49.2 53.1 31.6 34.4 34.5 57.8 66.7 49.8

IMF Position

Quota 26.0 28.2 28.2 31.4 31.8 32.4 32.2 30.3 30.4 30.1 29.8 30.1

Drawings outstanding - - - - 10.4 24.1 23.9 22.5 22.6 22.4 22.2 22.4

of which: oil facility drawings - - - - 4.2 17.8 17.7 16.7 16.7 16.5 16.4 16.6

Use of IMF credit - - - - 4.2 17.8 17.7 16.7 16.7 16.5 16.4 16.6

Source: IMF, International Financial Statistics.

Table 7.1. CROP PRODUCIION 1964-1975, AND NATIONAL DEVELOPMENT PLAN TARGETS FOR 1977

(metric ton.)

Average Plan Target

1964-1969 19 70 1971 1972 19 73 1974 (9756 1977

CerealsPaddyr 1,758,800 1,798,950 1,815,200 1,744,700 1,826,000 1,963,100 1,844,300 2,370,000Maize 135,200 108,825 113,490 105,800 107,870 118,090 122,790 200,000Sorgho 3 , 070 1,920 2, 31 5 3,195 610 1, 750 2,340PulsesBeans 32,875 34,890 34,145 34,825 3 5, 6 75 33,800 35,740 40,000Broad beans (pois d. cap) 17,500 21,950 20,430 28,330 18,120 23,920 3 7, 190 25,000Other pulses (Antaka I. Voanemha) 4,230 3,430 3,660 2,690 1,880 3,080 2, 220Roota & TubersPotatoes 95,950 94,280 1 25, 270 134,495 117.100 115,920 122,800 150,000Cassava 1,10 2 ,2 75 1,218,220 1,212,980 1,212,680 1,174,790 1,264,175 1,343,550 1,000,000Sweet potatoes 352,500 349,590 3 27, 545 31 1, 62 5 246, 3 55 267,370 2 76, 380 -Taro 92,950 94,290 99,340 79,050 86,050 76,900 79,500Industrial 6 Export CropsSugar cane 1,017,350 1 ,2 38, 6 25 1,189,690 896,150 1,041,250 1,317,200 1,010,600 1,400,000Groundnuts 41,050 41,490 40,655 49,250 38,060 40,040 38,300 60,000Tobacco 5,300 4,920 5,900 5,340 5,940 3,610 4,070 11,500Cotton 9,200 18,715 21,700 2 5, 370 30,629 3 3 ,342 34,000 40,000Castor seeds 960 1,300 1,010 1,300 900 1,960 405Coffee (green) 69,240 66, 55 5 5 7, 710 68,585 73,880 80,980 87,400 90,000Cocoa 735 1,100 1,040 1,240 1,200 1,560 1,300 2,000Pepper 2,410 2,115 3,490 2,445 2,520 2,820 1,990Vanilla (dry) 1 ,2 25 1 ,7 70 1, 720 1,900 1, 775 1,380 1,690 1,800Cloves 5,285 13,430 6,345 5,810 4,305 17,815 8,10(1 8,000T'ung oil seeds 7 ,190 4,350 3,990 2,145 2,000 1 ,7 70 1,785Sisal 29,000 26,250 24,720 29,500 30,900 29,980 20,845 30,000Vegetabl eaGreen beans .. 1,215 2 ,235 1,460 1,870 710Carrots .. 4,620 4,930 7,220 8,125 8,325Turnips .. 1,235 1,550 1,050 980 1,055Leeks .. 1,710 1,900 1,650 1,655 1,960Onions.. 4,215 5,720 4,265 4,125 5,500Cauliflower .. 930 9 75 1,190 1,050 1,080Tomatoes .. 6,435 7,605 12,010 11,875 11,205Cucumbers .. 615 735 7 72 1,055 1,375Lettuce .. 1,890 1,978 1,080 1,160 1,390Cabbages 2,660 3.560 4,430 4,350 4,650Cress . 620 755 270 270 370Other vegetables .. 7,865 9,700 7,400 7,115 8,135FruitsBananas .. 271,000 284,125 245,930 300,010 324,900Citrus fruits .. 29,865 42,520 66,810 80,475 90,610Pineapples .. 35,490 45,985 47,650 51,230 53,800Peaches and plums .. 6,455 8,170 10,435 11,145 10,890Apricots .*95 160 320 330 330Apples and pears .. 9,0)55 6,285 6,425 5,350 6,295. Grapes .2 , 585 3, 280 3,000 2,665 3 ,290 .-Lychee . 21,730 20,635 47,650 58,340 103,725Forestry Products

Raffia 12,660 8,780 5,755 10,555 10,620 9,425 9,530'aksa 2 ,3 70 2,980 2,260 660 1,440 410 370

p =preliminary.r = revised series.

nc,= t available.

%no,jroe M in I st Rre do D-6ve Io ppemen t Rural, Se rvic e de LIa S ta tis tique Ag r ic Ie,Minist8re d,, Plan, Plan de D6veloppsisent National 1974-1977.

Table 7.2: SALT WATER FISHING: MARKETED CATCH, 1970-1974

(metric tons)

1970 1971 1972 1973 1974

Fish /i 1,838.9 1,651.2 8,482.7 11,041.8 13,197.3

Shrimps /2 4,370.4 3,571.5 3,236.1 8,009.8 5,172.3

Crabs 179.7 258.0 141.2 121.5 380.0

Crayfish /3 96.9 41.7 45.6 34.8 132.0

Other /4 60.4 140.1 184.8 980.4 397.5

TOTAL 6,546.3 56625 12,090.4 201188.3 191279.1

/1 Fresh, dried, salted, smoked./2 Fresh or frozen./3 Alive or frozen./4 Oysters, mussels, octopi, turtles, etc.

Note: Data cover products sold in the domestic market and exported.

Source: Minist6re du D6veloppement Rural et de la Reforme Agraire.

Table 7.3: AGRICULTURAL GROSS OUTPUT, 1970-1975-- BY COMMODITY GROUPS AND MAJOR COMMODITIES --

(in constant prices of 1970; in millions of FMG)

1970 1971 1972 1973 1974 1975P

Cereals 27,942 28,235 27,114 28,325 30,483 28,834Paddy 26,837 27,079 26,027 27,241 29,286 27,585Maize 1,088 1,135 1,058 1,079 1,181 1,228

Starchy foods 9,292 9,484 9,621 8,623 9,144 9,973Potatoes 1,131 1,503 1,614 1,405 1,391 1,474Cassava 3,959 3,942 3,941 3,818 4,109 4,367

Vegetables 2,994 3,232 3,300 3,370 3,569 (3,700)

Fruits 2,943 3,380 4,157 4,840 5,792 (5,900)Bananas 1,084 1,137 984 1,200 1,300Citrus fruits 597 850 1,336 1,610 1,812

Industrial & export crops 20,740 17,936 19,234 19,811 24,264 21,852Cloves 3,358 1,586 1,453 1,076 4,454 2,025Coffee (green) 8,985 7,791 9,259 9,974 10,932 11,799Seed cotton 861 998 1,167 1,409 1,534 1,564Groundnuts 996 976 1,182 913 961 919Pepper 264 436 306 315 353 249Sisal 893 840 1,003 1,051 1,019 709Sugar cane 2,477 2,379 1,792 2,083 2,742 2,021Tobacco 605 726 657 731 444 501Vanilla (dry) 2,036 1,978 2,185 2,041 1,587 1,944

Livestock products 25,599 26,355 26,111 25,261 24,782 (25,500)Beef 14,597 14,074 13,500 12,972 12,929 (13,200)Pork 3,030 3,683 4,242 3,652 3,339 (3,500)Poultry 6,500 7,080 6,802 7,072 6,863 (7,000)

Fisheries products 2,986 2,906 33142 4,274 3,895 (4,000)

Forestry _roducts 7,596 8,726 9,221 9,635 (10,000)

Gross Output1 total 100,092 99,617 101,405 103,725 111,564 (109,750)

A&ricultural Production Index 100.0 99.5 101.3 103.6 111.5 (109.6)

p = preliminary.= not available.

Note: In this table, gross output is valued at guaranteed producer prices (point of collection ordelivery), at guaranteed export prices (port of shipment), or at average producer or whole-sale prices. It includes, therefore, sizeable margins on various products for transport,storage, and distribution at the wholesale stage.-Data in parentheses are estimates based on incomplete production data.


Table 7.4: AGRICULTURAL GROSS OUTPUT, 1970-1975-- BY COMMODITY GROUPS AND MAJOR COMMODITIES --

(in current prices; in millions of FMG)

1970 1971 1972 1973 1974 1975P

Cereals 27,942 29,938 28,948 30.989 61,674 58,180

Paddy 26,837 28,441 27,482 29,525 59,877 56,303Maize 1,088 1,475 1,428 1,456 1,771 1,842

Starchy foods 9,292 10,525 11,321 11,152 13,132 17,012Potatoes 1,131 1,879 2,488 2,313 2,898 3,070Cassava 3,959 4,124 4,123 3,994 5,057 8,061

Ve&etables 2,994 3,600 4,196 4.612 5,643 ..

Fruits 2,943 3,857 5,256 7,586 9,622 ..

Bananas 1,084 1,250 1,353 2,550 2,924

Citrus fruits 597 850 1,336 1,770 2,265

Industrial & export crops 20,740 18,832 20,264 22,145 31,575 30,020

Cloves 3,358 1,745 1,627 1,205 5,701 2,592

Coffee (green) 8,985 7,791 9,259 9,974 13,362 14,421Seed cotton 861 1,259 1,471 1,838 2,267 2,652Groundnuts 996 1,098 1,379 1,104 1,401 1,570Pepper 264 524 367 378 494 348

Sisal 893 850 914 1,842 2,228 1,459

Sugar cane 2,477 2,379 1,792 2,384 3,181 3,416

Tobacco 605 673 646 707 455 570

Vanilla (dry) 2,036 2,308 2,599 2,489 2,132 2,687

Livestock products 25,599 30,219 33,098 35,475 40,258 ..

Beef 14,597 16,706 18,235 19,598 21,161

Pork 3,030 3,904 4,730 4,565 5,175Poultry 6,500 8,061 8,370 9,404 11,634

Fisheries products 2,986 3,163 3,879 6,201 6,617 ..

Forestry products 7.596 9,209 12,288 15.753 18,639

Gross Output, total 100.092 109.343 119,250 133,913 187,160

p = preliminary.

= not available.

Note: In this table, gross output is valued at guaranteed producer prices (point of collection or

delivery), at guaranteed export prices (port of shipment), or at average producer or whole-

sale prices. It includes, therefore, sizeable margins on various products for transport,storage, and distribution at the wholesale stage.-


Table 7.5: AGRICULTURAL PRODUCER PRICES, 1966-1975

(FMG per kilogram)

1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Paddy /1 12.6 13.0 13.4 13.6 14.2 15.0 15.0 15.0 25.0 30.0

Vanilla (green) 185.0 130.0 150.0 170.0 190.0 220.0 220.0 220.0 240.0 240.0

Coffee 100.0 105.0 105.0 105.0 135.0 135.0 135.0 135.0 165.0 165.0Cloves 110.0 110.0 110.0 250.0 250.0 275.0 280.0 280.0 320.0 320.0Pepper 170.0 140.0 120.0 100.0 125.0 150.0 150.0 150.0 175.0 175.0

Sisal 40.0 36.0 30.0 35.0 34.0 34.4 31.0 59.6 74.3 70.0Tobacco 214.0 179.0 111.0 105.0 123.0 114.0 121.0 119.0 126.0 140.0Cotton /2 .. .. .. .. 46.0 58.0 58.0 60.0 68.0 78.0Cassava (fresh) /3 2.75 3.0 3.0 3.25 3.25 3.4 3.4 3.4 4.0 6.0

Groundnuts 27.0 27.0 24.0 24.0 24.0 27.0 28.0 29.0 35.0 41.0Lima beans (pois du cap) 20.0 20.0 22.0 25.0 30.0 30.0 30.0 35.0 37.0 38.0

.. = not available./1 Estimated average producer prices in the Central Highlands./2 Estimated average price, Acala./3 Cassava for industrial processing in the Lac Alaotra rift.

Source: Caisses de Stabilisation, INSRE and Central Bank.

Table 7.6: IMPORTS OF INPUTS FOR AGRICULTURE, 1970-1974

Value c.i.f. quantities1970 1971 1972 1973 1974 1970 1971 1972 1973 1974

(in millions of FMG) (in metric tons)

Fertilizer, total 598.3 398.9 137.0 348.0 404.8 30,346 22,916 7,787 15,460 12,760Nitrogen 71.4 67.3 9.6 65.7 155.0 4,887 6,502 516 3,782 4,737Phosphates 112.2 34.1 10.5 15.1 23.5 5,247 1,628 453 666 705

Potash 49.3 57.5 49.4 51.0 90.5 3,467 3,502 3,812 2,790 3,989

Other, including guano 12.3 6.2 2.5 8.7 22.9 896 320 119 386 474

Compounds 353.1 233.9 65.1 207.4 112.9 15,849 10,963 2,887 7,835 2,856

Urea for agricultural use 191.8 156.6 159.3 139.9 601.9 10,555 8,987 8,200 6,020 7,732

Insecticides 355.9 287.5 200.7 289.2 425.1 1,399 1,204 914 1,178 1,210Herbicides & fungicides 64.4 58.2 46.4 45.6 96.6 105 118 93 94 144Rat poisons, etc. 4.1 4.9 4.3 3.6 13.5 10 7 6 4 19

(number)

Motorplows 7.4 0.1 2.6 1.8 32.9 50 1 12 7 115Tractors (wheels) 307.0 293.2 175.9 100.2 331.0 364 298 169 105 211

Machinery 209.7 197.9 152.3 121.1 147.8Plows 45.7 54.8 32.0 15.4 47.1Threshing & harvesting machines 64.4 61.3 52.2 69.1 22.3Milking machines 2.9 2.4 0.5 . 2.5Other 96.7 79.4 67.6 36.6 75.9

Hand tools 111.1 141.1 105.2 87.6 53.6

. less than 50,000 FMG.

Source: INSRE,Statistiques du Commerce Exterieur de Madagascar.

Table 8.1: INDUSTRIAL PRODUCTION, 1970-1976(Quantities)

Units 1970 1971 1972 1973 1974 1975 1976 f

Food processing and beveragesSugar tons 101,647 93,310 103,806 99,175 114,985 114,513 110,000Tapioca " 3,695 3,754 2,001 2,895 2,239 2,064 2,800Starch " 1,876 1,115 2,041 892 1,793 2,151 2,000Edible oils " 7,159 5,898 6,137 6,847 4,611 5,645 8,500Beer hl 92,764 112,529 120,770 138,468 182,825 211,851 202,500Milk concentrate tons - - 1,668 4,238 4,525 3,974 4,500Beef, processed " 12,075 12,717 11,514 11,014 7,784 5,029 5,000Pork, processed " 751 873 599 487 211 171 200Salt, sea "- 4,201 4,605

Tobacco industryCigarettes tons 951 944 1,092 1,317 1,294 1,248 1,300Smoking tobacco " 140 191 209 229 177 153 200Chewing tobacco 1,551 1,755 1,869 1,811 1,861 1,971 1,900

Textile industryCotton fabrics '000 m 47,655 60,653 65,618 66,029 80,617 77,685 85,000Sacks tons 4,183 3,853 3,563 3,720 4,434 4,167 5,000Blankets 1,201 1,212 1,399 1,513 1,302 1,505 1,500Sisal products 670 715 756 786 929 584 1,000

Leather industryShoes '000 pairs 2,150 2,520 2,597 2,492 2,609 2,236 2,500

Paper industryPulp tons 6,160 6,667 6,205 8,385 10,390 10,622 11,000Paper 5,693 5,852 5,137 5,469 6,628 6,773 7,000

Chemical industrySoap tons 6,444 9,802 12,344 12,546 12,998 16,819 14,000Candles " 2,891 2,996 3,Q12 3,734 3,787 3,067 3,500Matches '000 boxes 74,853 60,086 62,993 53,900 53,816 51,233 80,000Paint tons .. 2,965 2,611 2,320 2,487 2,448

Petroleum refining 3Butane m 15,579 15,254 19,192 20,335 18,673 16,611 19,000Motor spirits " 169,413 153,747 162,795 190,422 181,749 163,446 165,000Kerosene " 75,935 70,372 77,910 98,309 99,320 109,544 83,000Gas oil 180,568 171,305 189,859 216,863 201,065 226,852 176,000Fuel oil 221,487 212,561 201,208 240,320 231,254 313,989 206,000

OtherCement tons 75,216 76,930 64,177 69,863 61,447 58,021 70,000Corrugated sheet metal " 8,210 8,762 8,435 9,018 11,461 4,654 4,600Nails " 1,631 1,736 1,087 1,484 1,448 739 700Batteries no. - 24,072 26,231 26,301 29,533 25,277 25,000

* not available.f forecast.

Source: INSRE; 1976, forecast of the Direction de l'Industrie et des Mines.

Table 8.2: MINERAL PRODWUCTION 1970-1975

Unit 1970 1971 1972 1973 1974 1975

Gold g 16,571 12,849 5,815 2,168 2,418

Chromite tons 104,687 111,697 111,770 157,714 155,874 194,127Graphite tons 18,321 20,051 18,154 13,963 17,280 13,429Mica tons 943 588 398 890 857 448

Beryllium(industrial) kg 52,027 150 9,261 2,478 -Quartz(pi6zo-electro) kg 2,972 596 2,084 410 367Quartz(ornamentation) kg 15,053 42,253 7,751 851 3,1417Quartz(other) kg 75,133 91,508 152,810 17,048 105,1460Grenat(jewelry) kg 33 40 32 62 16

Grenat(clockwork) kg 3,621 3,323 3,666 9,010 6,301Grenat(industrial) kg 40,800 40,510 49,775 2,596 2,776Beryl(gems) kg 1 36 2 4 2Tourmaline kg 1,826 1,126 4,722 7,549 1,236Amethyst(gems) kg 13 11 2 14 -

Citrine kg 18 13 10 22 20Jasper kg 38,920 320 270 514 314,31497ircon kg 2,554 2,739 - - -

Amethyst(ge'ode) kg 6,979 9,123 9,867 14,928 -

.. =not available.

Source: Service des Mines.

Table 8.3: ELECTRICITY PRODUCTION AND CONSUMPTION, 1960-1975tL

Production Consumption _ Production ConsumptionYear Total Hydro Thermal Total of which Index Index

('000 kwh per annum) Tananarive (1970=100) (1970=100)('000 kwh per annun)

1960 72,468 60,816 11,652 58,128 38,148 42.03 37.641961 76,524 65,820 10,704 61,752 39,864 44.39 39.981962 83,544hL 70,032 13,512 69,32h 43,848 h8.46 44.891963 89,856 73,368 16,488 75,504 46,188 52.12 48.89196h 98,604 78,792 19,812 8h,180 49,h76 57.19 54.51

1965 102,168 81,804 20,36h 88,28h 52,22h 59.26 57.161966 110,268 84,156 26,112 95,640 55,272 63.96 61.931967 126,768 96,396 30,372 112,428 58,872 73.53 72.801968 139,788 101,616 38,172 123,660 64,260 81.08 80.071969 150,276 109,500 h0,776 131,208 68,h36 87.17 84.96

1970 172,404 117,252 55,152 15h,440 73,488 100.00 100.001971 195,108 128,856 66,252 176,040 80,268 113.17 113.991972 213,380 142,093 71,287 191,595 82,272 123.77 124.061973 221,049 163,166 57,883 202,189 82,275 128.22 130.921974 237,903 156,467 81,h30 218,337 77,780 137.99 1h1.37

1975 240,074 173,765 66,309 192,969 77,650 139.25 124.95

/1 Data cover only the operations controlled by JIRAMA, the state-owned utility holding, and exclude electricitygenerated by various small operators and the auto-generation and consumption of industrial enterprises.JIRAMA, established in 1975, controls the operations of the former EEM (private) and SEM (semi-public).

/2 SEM began operating in July 1962.

Source: INSRE.

Table 8.4: INDUSTRIAL PRODUCTION INDICES, 1970-1975

(1970=100)

(WeightsIndustry in %; 1970 1971 1972 1973 1974 1975

base 1970)

Food & beverages (39.54) 100.0 93.0 93.0 85.0 91.0 88.0Tobacco ( 3.91) 100.0 108.0 119.0 128.0 127.0 128.0Textiles (20.30) 100.0 122.0 132.0 133.0 162.0 175.0Clothing ( 7.72) 100.0 84.0 112.0 111.0 116.0 121.0Wood ( 1.85) 100.0 132.0 86.0 72.0 66.o 54.0Paper ( 2.36) 100.0 108.0 101.0 136.0 169.0 172.0Printing ( 3.79) 100.0 80.0 87.0 91.0 93.0 72.0Leather ( 0.78) 100.0 103.0 216.0 259.0 332.0 237.0Rubber ( 0.36) 100.0 103.0 120.0 133.0 157.0 169.0Chemicals ( 4.83) 100.0 154.0 130.0 140.0 149.0 159.0Petroleum refining ( 4.97) 100.0 94.0 98.0 116.0 110.0 125.0Construction materials ( 7.69) 100.0 113.0 96.0 70.0 65.0 31.0Transport equipment ( 1.90) 100.0 128.0 114.0 95.0 88.0 90.0

Manufacturing, total (100.00) 100.0 1O4.7 107.0 102.4 112 .0 11-2.

Mining - 100.0 102.0 98.0 138.0 138.0 160.0

ElectricityProduction, total - 100.0 113.2 123.8 128.2 138.0 139.3

Hydro _ 100.0 109.9 121.2 139.2 133.4 1 8.2Thermal - 100.0 120.1 129.3 105.0 147.6 120.2

Consumption, total - 100.0 114.0 124.1 1 0.9 141.4 124.9High voltage /1 - 100.0 116.4 136.2 149.2 173.2

L Consumption of high voltage electricity in industrial enterprises.

Note: These indices are based on INSRE's regular surveys of largeenterprises and do not necessarily represent the entire branchor subsector. The weights for the overall index are based onthe value added by these enterprises in 1970.

Source: INSRE (rebased).

Table 8.5: SELECTED INDICATORS OF RAIL TRANSPORT, 1960-1975

Freight/1 Passengers Receipts from: Employment at RNCFM/2

Year (thousand (million (thousand (million Freight/l Passengers Malagasy Expatriatestons) ton-km) passengers) passenger-km) (millions of FMG) (number)

1960 536.4 130.8 2,036.4 135.6 1,120.8 304.81961 531.6 136.8 1,971.6 133.2 1,394.4 308.41962 630.0 170.4 2,062.8 136.8 1,548.0 319.21963 614.4 163.2 2,090.4 147.6 1,521.6 332.41964 603.6 165.6 2,175.6 150.0 1,830.0 344.4

1965 603.6 168.0 2,100.0 147.6 1,568.4 348.01966 572.4 159.6 1,926.0 150.0 1,582.8 348.0 4,240 351967 627.6 178.8 2,270.4 171.6 1,666.2 398.4 4,318 321968 736.8 218.4 2,294.4 181.2 1,999.9 432.0 4,733 311969 699.6 208.5 2,099.4 174.6 1,963.1 429.6 5,040 24

1970 703.2 223.6 2,365.2 182.3 2,236.3 451.5 5,174 221971 754.8 245.5 2,594.7 199.9 2,471.3 493.6 5,254 251972 648.2 205.1 2,587.2 191.8 2,095.1 468.3 5,409 241973 656.0 205.8 2,958.1 211.5 2,068.5 518.3 5,075 161974 658.4 211.1 3,607.0 253.9 2,189.4 630.1 4,979 14

1975 651.0 207.6 3,710.5 269.7 2,195.2 629.4 4,770 10

.. = not available./1 Beginning in 1972, data exclude passengers' baggage./2 Reseau National des Chemins de Fer Malagasy.

Source: INSRE and Direction Gen6rale du Plan.

Table 8.6: AIR TRANSPORT 1960-1975

InternationalYear Internal / P gFreight Passengers Freight-' Passenger'

(tons) ('000) (tons) ('000)

1960 8,030 108.8 506 28.81961 7,048 108.5 850 37.61962 7,012 107,0 842 44.01963 6,544 109.9 901 43.o1964 6,866 1o4.3 1,056 45.5

1965 7,026 107.4 1,586 52.21966 7,165 115.0 1,932 71.61967 6,213 113.1 2,216 66.21968 5,733 120.6 2,446 67.41969 3,468 112.0 3,269 87.7

1970 4,05i 116.0 4,170 100.71971 3,831 128.3 5,441 123.01972 3,568 136.8 5,147 93.41973 4,114 157.6 6,069 90.11974 4,871 171.2 5,870 89.0

1975 4,606 156.2 4,486 66.7

Freight loaded and unloaded.& Passengers arriving and departing, excluding transit passengers.

Source: INSRE.

Table 8.7: VOLUME OF MARITIME FREIGHT TRAFFIC BY PORT, 1960 - 1974

(Freight loaded and unloaded; in thousands of metric tons)

Diego- Nossi-Be Fort- Other/l Of Which:Tamatave Majunga Suarez Tulear & Port Manakara Dauphin Morondava Mananjary Morombe Ports- Total Coastal /2

St.Louis Traffic -

1960 399 186 82 61 98 56 30e 16 18e 30e 340 1,010e 325e

1961 421 171 84 63 88 52 35 18 16 34 37 1,019 317

1962 467 197 86 69 104 61 49 14 20 29 42 1,138 332

1963 415 244 83 63 125 59 50 15 20 31 43 1,148 382

1964 452 250 92 60 133 47 63 15 19 34 54 1,219 418

1965 580 245 89 63 106 53 64 18 20 40 53 1,331 456

1966 6 3 2L- 265 81 60 167 47 47 18 19 30 52 1,420 420

1967 958 252 100 58 140 52 45 18 20 21 52 1,716 498

1968 1,133 282 93 61 1 4 0 e 66 49 20e 24 22e 50e 1,940 546

1969 1,360 303 114 81 140 62 53 22 28 23 51 2,237 600

1970 1,599 306 120 79 140 53 50 21 17 23 54 2,462 658

1971 1,400 341 127 111 151 67 53 19 21 28 58 2,376 675

1972 1,472 304 100 56 181 78 46 15 16 29 75 2,372 652

1973 1,607 318 122 79 177 71 57 12 21 26 78 2,568 760

1974 1,684 310 109 76 154 62 51 22 19 19 63 2,569 803

e - estimated./1 Analalava, kntalaha, Antsohihy, Maroantsetra, Sambava, Vohemar./2 Including some traffic with Mauritius, Reunion and the Comores./3 Imports of crude petroleum and exports of refined petroleum products began in late 1966.

Source: Direction des Douanes.

Table 8.8: SELECTED INDICATORS OF MOTOR VEHICLE TRAFFIC, 1965-1974

Motor Vehicles in Use Consumption of Motor Fuels(thousands) (million liters)

Passenger cars Commercial vehicles Gasoline Diesel Total

1965 32.1 27.1 85.8 70.5 156.31966 35.0 28.6 86.8 75.0 161.8

1967 37.6 30.0 88.6 77.8 166.41968 40.5 32.4 97.6 92.1 189.71969 43.1 34.8 103.1 131.2 234.3

1970 46.0 37.2 104.6 136.5 241.1

1971 49.2 40.3 111.3 158.5 269.81972 51.2 42.7 112.2 158.6 270.81973 52.0 .. 115.4 164.2 279.6

1974 55.0 .. 113.4 176.0 289.4

.. = not available.

Source: INSRE.

Table 8.9: REGISTRATION OF MOTOR VEHICLES 1960-1975

Registration of New Motor Vehicles First-Time Regtstration of Used Motor Vehicles GrandOther Commercial Motorcycles TotalPassenger Cars Buses Trucks & Pick-ups Vehicles Tractors & Scooters Other Total Passenger Cars Trucks & Pick-ups Other Total

1960 1,807 31 1,385 117 77 122 36 3,575 526 123 77 726 4,3011961 1,746 48 1,173 123 97 97 49 3,333 485 238 80 803 4,1361962 1,941 32 1,163 81 111 52 51 3,431 558 103 49 710 4,1411963 2,125 40 1,293 87 93 58 57 3,753 707 82 59 848 4,6011964 2,173 85 1,549 111 133 33 56 4,140 598 101 39 738 4,878

1965 2,431 100 1,423 81 129 35 67 4,266 542 134 158 834 5,1001966 2,099 195 1,298 49 167 39 59 3,906 486 80 68 634 4,5401967 2,451 199 1,561 90 209 40 61 4,611 466 69 49 584 5,1951968 2,695 376 1,901 375 252 65 112 5,776 478 88 97 663 6,4391969 .. 411 1,821 417 .. .. .. 5,248 .. ..

1970 2,253 349 1,638 241 191 84 94 4,850 389 29 37 455 5,3051971 2,558 427 2,259 251 224 107 125 5,951 410 34 57 501 6,4521972 .. .. 1,785 190 .. .. .. 4,628 .. .. .. ..1973 1,449 230 1,418 70 180 197 74 3,618 247 144 4Z4 435 4,0531974 .. 167 1,375 2 .. .. .. 2,217 .. .. .. ..

1975 1,090 153 1,506 302 264 355 86 3,756 156 59 49 264 4,020

.. = not available.

Source: INSRE.

Table 8.10: EDUCATIONAL ENROLLMENTS, 1966-1974

Number of Pupil/TeacherTeachers Ratio

1966 1967 1968 1969 1970 1971 1972 1973 1974 1974 1974

I. Primary Education

Public 468,000 488,000 566,000 606,000 645,000 709,000 744,000 766,000 825,000 11,200 74

Private 184,000 195,000 203,000 232,000 238,000 229,000 261,000 265,000 213,000 5,170 41

Total 653,000 683,000 769,000 837,000 883,000 938,000 1,004 000 1,031,000 1,038,000 16,400 63

II. General Secondary Education

Public 18,300 23,000 26,400 24,700 27,800 30,100 35,000 51,300 57,400 2,100 27

Private 33,800 36,700 40,600 61,100 57,500 71,300 70,400 60,800 57,000 1,760 32

Total 52.200 59,600 67,000 85,800 85,300 101,400 105,300 112.100 114,500 3,860 30

III. Technical Secondary Education

Total 4,400 5,800 5,500 6,000 6,800 7,000 /1 5,500) .. 81000

IV. Higher Education

Total 2,900 3,100 3,300 3400 3,900 5.300 5,600 7.000 /1 9.000 /1 200 /1 4 /1

= not available./1 approximate figure.

Source: INSRE, Inventaire des Statistiques Sociales 1966-1972i Ministry of Education, Annuaire Statistique 1974; and government request docurent 1975.There are considerable discrepancies between the figures given in these sources.

Table 8.11: HOSPITAL BEDS AND PHYSICIANS, 1972

(January 1, 1972; by province)

Hospital Beds/i Physicians

Tananarive 6,141 364Fianarantsoa 3,936 81Tamatave 2,380 73Majunga 2,078 76Diego-Suarez 1,704 54Tulear 2,627 94

Total 18'866 742

Population per hospital bed 421 -Population per physician - 10,694

/1 Public and private.

Source: Ministry of Social Affairs.

Table 9.1: COST-OF-LIVING INDICES IN TANANARIVE, 1960-1976

(annual averages; 1970-10CZL)

Lower Income/2 Higher Income 3 CompositeYear Households Households Index

General Food General Food General/4 Food/5

1960 - - 69.6 70.4 - _1961 - - 70.5 72.1 _ _1962 - - 71.9 73.0 - _1963 - - 73.9 74.7 - _1964 85.6 84.4 77.6 77.7 83.6 83.1

1965 89.3 89.8 79.7 80.2 86.9 87.91966 92.0 93.6 81.9 81.8 89.5 91.21967 92.7 93.2 84.1 83.4 90.6 91.21968 93.6 92.8 86.4 86.0 91.8 91.41969 97.2 97.1 95.0 94.8 96.7 96.6

1970 100.0 100.0 100.0 100.0 100.0 100.01971 105.4 105.3 106.1 107.2 105.6 105.71972 111.3 111.9 112.9 114.4 111.7 112.41973 118.1 122.3 115.4 119.9 117.5 121.81974 144.2 159.1 127.6 138.6 140.1 155.1

1975 156.0 169.9 145.1 157.7 153.3 167.51976 (Jan.-June) 161.9 174.7 157.2 168.8 160.8 173.6

Li Old and new COL indices linked and rebased./2 Formerly: Malagasy households.ZX Formerly: European households.7C Weights: lower income households 75%, higher income households 25% (mission

calculation)./5 Weights: lower income households 80%, higher income households 20% (mission

calculation). See also general note below.

General note: The new COL indices for Tananarive are based on the findings of thehousehold budget surveys of 1968-1969. They are originally calculatedwith the base period August 1971-July 1972. The weight of food itemsin the general COL indices is 60e35% for lower income households and45,16% for higher income households.

Source: INSRE, and mission calculations.

Table 9.2: COST-OF-LIVING INDICES IN TANANARIVE, 1974-1976

(monthly averages; 1970=100)

Year/Month Lower Income Households Higher Income HouseholdsGeneral Food General Food

1974 January 129.4 138.9 119.7 128.4February 133.3 144.7 120.1 128.1March 139.8 154.6 123.2 132.3April 143.6 160.5 125.5 134.9May 145.8 163.7 126.1 136.0June 145.1 161.8 127.0 137.8

July 145.2 161.8 127.1 137.4August 147.1 162.2 130.2 143.5September 146.1 159.1 131.1 143.8October 149.5 163.1 131.4 143.9November 153.6 170.7 134.4 148.4December 152.3 168.4 135.1 148.5


July 156.1 169.3 145.6 158.1August 155.7 167.9 146.5 157.5September 154.8 166.1 148.9 158.8October 157.1 169.4 150.9 159.8November 156.4 167.5 150.5 158.6December 157.7 169.4 152.3 160.0


For notes, see Table 9.1

Source: INSRE.

Table 9.3: RETAIL PRICES FOR SELECTBD CGFKODITIES IN TANANARIVE, 1970-1976

Page 1 of 3 pages

Annual Averages JulyFMC per: 1970 1971 1972 1973 1974 1975 1976

I. Food and Beverages

(a) Cereal preparations & starchy foods

Bread (cut & weighed) kg 54 54 54 55 65 65 65Bread, long loaf, 300 g 25 25 25 26 32 32 32

*Wheat flour kg 61 61 65 66 86 86 86*Noodles ("Lustucru") 250 g 101 102 107 124 156 201 212*Baby food, dry ("Nestle Cdrelac") box, 450 g 280 305 317 348 385

Rice, de luxe ("Vary Lava") kg 60 60 60 67 102 103 103Processed rice kg 34 34 34 38 62 65 65Maize kg 60 64 65 65 72 71 75Biscuits box of 24 104 lO5 105 106 110 123 137Potatoes (top grade) kg 24 28 31 32 40 40 43

(b) Meat, poultry, fish

Beef, sirloin kg 417 522 638 659 606 601 646Beef, rumpsteak kg 338 394 420 477 506 500 516Beef, w/bone /I kg 146 168 190 228 247 249 260Veal kg 802 863 927 986 1,033 1,145 1,213Beef liver /1 kg 170 180 204 243 263 300 300

Mutton, leg kg 424 446 561 714 703 723 742Mutton, stew kg 304 330 410 473 507 555 583Pork, w/bone /1 kg 226 239 251 281 346 366 420Pork, liver pat6 kg 601 601 604 623 667 ..Pork sausage, dry kg 1,189 1,223 1,206 1,253 1,336

*Ham (French) /2 kg 1,626 1,721 1,667 1,517/2 1,789 1,991 1,965

Rabbit, prepared kg 464 496 568 618 649 692 695Chicken, prepared kg 415 424 449 485 541 575 588Chicken, live kg 206 231 252 272 343 412 429Duck, live kg 175 200 225 232 300/3 380 370Duck, prepared kg 432 448 468 494 552

Fish, freshwater /4 kg 263 279 220/4 239 297 359 356Fish, saltwater kg 203 266 340 336 396

*Sardines (Morroccan) can 69 79 81 81 91

(c) Dairy products, oilS & fats

Milk, fresh liter 45 46 50 50 70 81 87*Concentrated milk, sweetened ("Nestle")/5 can, 397 g 64 73 83/5 85 92 110 124*Powdered milk (Dutch) 453 g 175 187 231 240 319 .Butter (Anamalanga) kg 500 500 500 500 560 570 1,000

*Butter (French) kg 393 575 890 679 853 1,117

*Cheese ("Camembert") piece 249 283 298 314 451 581 720*Cream cheese ("Gruy6re") /6 box 96 105 110 107/6 135 .*Margarine ("Astra") 250 g 104 120 126 137 177*Olive oil ("Plagniol") liter 401 396 384 426 .. .

Groundn.t oil, refined liter 167 169 176 176 277 266 255Eggs, chicken ("Analakely") dozen 180 192 204 216 276 288 360

(d) Vegetables

Onions kg 104 103 132 222 194 155 168Carrots kg 32 33 31 43 45 72 38Cabbage kg 44 33 37 36 38 50 40Anamamy kg 43 37 36 36 37 52 50Anatsonga kg 40 37 35 37 38 51 35Tomatoes kg 74 109 114 184 163 90Beans, dry kg 118 125 137 139 142 162 153Lettuce kg 117 114 114 92 89 .. -

* . denotes imported items. . not available./1 Category B meat.75 Change of series beginning in 1973.7i Mission estimate.74Z 1970 & 1971: carp; beginning in 1972: tilapia.7? Beginning in 1972, produced locally./6 Beginning in 1973, "Vache qui rit". (continued)

Table 9.3: RETAIL PRICES FOR SELECTED COMMODITIES IN TANANARIVE, 1970-1976(continued)

Page 2 of 3 pages

Annual Averages July1970 1971 1972 1973 1974 1975 1976

I. Food and Beverages (cont.)

(e) Fruits

Bananas kg 28 30 34 29 31 35 39Oranges, top choice kg 81 75 90 72 84 93 97Oranges, second choice kg 68 61 81 70 81Mandarins kg 96 95 112 104 117 . .Mangos, ordinary kg 33 36 33 37 54Apples (Antairabe, top choice) kg 91 107 96 109 78

(f) Groceries, Spices, etc.

Coffee, roasted & ground 250 g 91 97 102 102 102 120 122Coffee, green & in beans kg .. 177 177 177 190

*Instant coffee/5"Nescaf0g) 50 g 165 177 232/7 236 263 352*Tea ( cLipton "ec"500 B 1,099 1,182 6361 667 776*Soup, instant ("Maggi") package, 4 servings 97 100 100 99 108

Salt, cooking kg 32 31 32 32 33 34 37*Salt, table ("Cerebos") 500 g 70 71 73 77 84 104 103

Sugar, white granulated kg 68 69 70 70 73 73 73*Sugar, cubes ("Saint-Louis") kg 159 163 182 192 208*Mustard jar 112 118 119 158 157Chocolete ("Robert") bar, 100 g 46 49 50 52 55 67 71

(g) Beverages

Mineral water (Antsirabe) bottle, 65 cl 31 33 34 33 33 33 46*Mineral water (Evian) bottle 135 147 155 164 183

Beer ("Three Horses") bottle, 65 cl .. 101 103 104 115 126 128*Beer can, 35 cl .. 94 95 100 107 118*Table wine, red ("Kiravi", 11 ) liter 147 158 159 177 208 284 304*Dinner wine ("Champelure Vernaud") bottle 413 449 450 466 479 ..

*Vermouth ("Cineano") liter 806 940 1,029 1,186 1,625 ..*Cognac ("Martell") bottle 1,706 1,921 2,358 3,069 4,809 .

Rum liter 362 377 384 469 500*Whisky ("Black and Whiten) bottle 1,525 1,614 1,648 .*Whisky ("Johnny Walker") bottle .. 1,688 1,692 1,973 2,393

11. Electricity, Water, Fuel

Electricity (lighting),less than 10 kwh/B kwh 27.258 26.610 27.109 26.414 27.618 27.618 27.618

Electricity (lighting),more than 10 kwh/8 kwh 32.596 31.296 31.246 31.463 35.231 37.650 36.466

Electricity (high voltage),metered/8,9 kwh 12.988 13.588 14.397 15.011 16.457 17.706 17.276

Water (supplemental charge/10) m3

28.29 29.87 31.33 32.01 34.90 37.30 35.76

Butane gas, bottled 12.5 kg 1,910 1,643 1,375 1,375 1,480 1,520 1,520Gasoline liter 49.40 51.44 52.47 52.20 58.91 78.20 78.20Fuel oil liter 32 34 36 36 42 45 45Candles, medium size box of 10 68 71 69 70 76 100 100Charcoal 5 kg 41 42 42 43 45

* = denotes imported items.= not available.

/7 Beginning in 1972, 226 g only./8 Including local tax./9 Off-peak use./10 In addition to basic fee for 500 liters per day.

Table 9.3: RETAIL PRICES FOR SELECTED CGOEODITIES IN TANANARIVE, 1970-1976(continued)

PaRe 3 of 3 page4

Annual Averages JulyPHO per: 1970 1971 1972 1973 1974 1975 1976

III. Household products

*Detergent powder ("mone") package 126 143 150 147 147*Abrssive cleanser ('Vim") box 160 164 174 182 204Household soap kg 107 107 118 133 194 240 231*Floor wax ("Johnson") kg 741 773 803 815 902Floor wax ("3 Abeilles"l) tube 77 78 83 82 93

*PFlare ("Duralex")/1l piece 105 118 246/11 247 258*Glass ("Duralex") plece 55 60 67 71 78*Cooking pot, aluminum, 6 liters ("SEB") piece 7,783 8,022 8,423 8,256 8,735cLlghtbulb, incandescent (100 W, standard) piece 80 85 95 93 116 206 220*tlectric cord (750 Th, 16/10) m 32 38 35 33 34*Electric heater piece 11,320 12, 230 12,393 12,841 12,841

TV. Clothingt & Textiles

*Bllanket, wool (220 x 240 on) piece 11,510 11,660 11,917 12,277 13,729*Woolen fabric, clothing m 1,022 1,048 1,063 1,100*Flannel (wool & polyester)/12 .s 3,150 3,240 2,646/12 2,450 3,200Cotton fabric, undyed m 75 91 100- 100 11l 112

*Layette, woolen/12 piece 246 261 198/12 204 207

*Thread, sewing bobin, 500 yards 140 159 160 160 160*Socks, nylon ("D.0.") pair 505 556 587 596 600*Shirt, men's piece 3,265 3,340 4,010 4,364 4,338*Shoes, men's (leather)/12 pair 7,973 8,980 9,172/12 8,972 9,085Straw hat ("Mad Cap") piece 868 902 967 950 975 1,000 1,000

V. Toiletry & Pharmaceuticals

*Body soap ("Petite") bar 50 57 66 75 90*Toothpaste ("Gibbs Chlorophyle") tube 86 89 92 95 92*Toothbrush ("Gibbs") piece 158 163 1 77 175' 180 184 246*Razor blades ("Gilette bleue") S blades 50 49 46 59 45*Lipstick ("H.H.Ayer") stick 770 785 855 971 997

*Rubbing alcohol 900 liter 1,755 1,755 1,755 1,755 2,120* Antiseptic ("Mercurochrnme") bottle, 30 cc 38 43 43 43 42*Bandage ("Albuplast") roll, 500 a 2 on 138 147 151 154 134*Antibiotic ("Sp6cilline") bottle; l00,000 U 49 49 48 48 47 46 46* Cotton, surgical 100 g 155 160 188 208 204

VI. Miscellaneous

*Cigarettes ("Gauloises bleues") pack of 20 70 73 80 80 89 90 90Cigarettes ("Melia") pack of 20 50 51 55 55 64 65 65

*Tobacco ("Scaferlati") package 80 83 90 90 99Matches 10Oboxes 50 50 50 50 50 50 50Chewing tobacco bag, 9 g 10 10 10 10 10

*Magazine ("Equipe du Dlmanche"), airmail copy 115 140 170 170 198*Magazine ("Paris-March'), surface mail copy 140 146 190 230 278*Pocket book ("S&rie noir") copy 273 271 282 282 297*Film, 8mms color ("Kodachrcse 2") roll 1,768 1,775 1,775 1,806 1,700

Hair cut, men 1 cut 165 191 242 242 276 325 325Hair dressing, lady 1 sitting 930 964 1,033 1,023 1,025Dry cleaning, men's suit 1 suit 660 660 660 660 7 12 785 785Shoe repair, men's shoes pair 960 1,170 1,381 1,300 1,211 1,833meal at restaurant/13 persun 437 454 455 455 597 686 738Cinema ticket, balcony (last evening show) ticket 131 165 168 168 170 164 158Taxi (short ride, single passenger) ride 50 59 100 100 100 100 100

* denotes imported items5not available.

/11 Beginning in 1972,chamge Of brand: "Arcopal"./1-2 Change of product, beginning in 1972.71-3 Including service charge.

Source: INSRE

Table 9.4: WHOLESALE PRICES FOR SELECTED COIMODITIES IN TANANARIVE, 1970-1976

Annual Averages JuneFMG per: 1970 1971 1972 1973 1974 1975 1976

Wheat flour 100 kg 5,303 5,303 5,303 5,645 7,355 7,355 7,355M;ilk concentrate, sweet 48 boxes 2,921 3,306 3,780 3,728 4,061 5,124 5,661Table wine, red (11.50) hl 9,467 10,250 10,500 11,767 14,083 19,367 20,500Aperitif ("Dubonnet") 12 bottles 8,157 9,666 10,531 13,228 18,458 21,192Cognac ("Martell") 12 bottles 16,767 19,400 22,200 30,844 38,376 51,154

Household soap (local) A 100 kg 9,344 9,400 10,637 12,147 17,959 19,843 19,540Cotton tissue, unbleached (local) 100 m 5,400 5,525 5,900 6,108 7,400 8,292Cotton tissue, printed (local) 100 m 9,467 9,750 10,500 10,875 13,567 15,392 18,700Cotton blanket, 150x200 cm (local) piece 525 565 654 650 650 663 810

Steel bars, round ($ 10-12) 100 kg 6,571 7,599 7,565 7,631 10,607 13,902 11,445Sheet metal, non-galvanized 100 kg 11,053 11,034 10,943 10,890 15,368 17,393Galvanized sheet metal, flat (200 x 100 x 0.1 cm) piece 2,012 1,970 1,962 1,967 2,137 2,765 2,701Galvanized sheet metal, corrugated 7/10 (200 x 90 cm) piece 1,041 1,062 1,092 1,139 1,374 1,512

Cement, local (Amboanio) ton .. 14,100 14,100 14,189 14,704Cement, imported (French) ton 15,036 14,836 14,760 15,443 17,244 19,756Window glass (60 x 100 cm) m2 540 614 752 802 1,376 1,653 1,566Plywood (6 mm) m2 527 590 632 727 880 1,460 1,156Electric wire, insulated (10/12) 100 m 1,325 1,488 1,200 1,200 1,919 2,690

Light bulbs, standard (100 W) 100 5,300 5,792 6,133 5,938 9,814 14,683 14,700Printing paper (local) 100 kg 13,889 14,167 14,140 14,092 15,257 16,643 17,736Cardboard, for bookcovers 100 kg 12,826 13,051 13,362 12,984

.. = not available.l 360 g pieces; 1970: imported.

Note: Price quotations do not include turnover tax (taxe unique de transaction).

Source: INSRE.

Table 9.5: SELECTED PRICE INDICES, 1970-1975 (SUMMARY)

(1970-100)

1970 1971 1972 1973 1974 1975

Cost-of-Living Indices (General)Lower income households 100.0 105.4 111.3 118.1 144.2 156.0Higher income households 100.0 106.1 112.9 115.4 127.6 145.1Combined index /1 100.0 105.6 111.7 117.5 140.1 153.3

Cost-of-Living Indices (Food)Lower income households 100.0 105.3 111.9 122.3 159.1 169.9Higher income households 100.0 107.2 114.4 119.9 138.6 157.7Combined index /2 100.0 105.7 112.4 121.8 155.1 167.5

Export Price Indices /3All products 100.0 99.4 102.2 106.0 136.9 128.3PAgricultural products 100.0 96.6 95.8 96.1 121.1Livestock products 100.0 107.7 128.9 148.3 146.3Petroleum products 100.0 106.4 99.0 111.3 275.4 337.OPOther minerals 100.0 109.5 106.7 94.8 123.6Metals & machinery /4 100.0 104.4 96.7 110.5 127.7Other processed and manufactured goods 100.0 106.1 114.2 124.0 157.3

Import Price Indices /5All products 100.0 103.5 106.5 118.4 192.7 l93. OPFood 100.0 107.1 114.2 142.8 271.9Rice 100.0 92.6 94.4 164.5 328.3Beverages 100.0 99.4 98.5 121.4 135.6Capital goods /6 100.0 105.4 106.0 112.6 148.1Crude petroleum 100.0 110.0 114.9 121.2 420.4Fertilizer 100.0 93.6 101.0 120.1 193.1

Terms-of-Trade Index 100.0 96.1 96.0 89.5 70.9 66.5P

.. - not available.p . provisional./1 Weights: 75% and 25% (see Table 9.1)./2 Weights: 80% and 20% (see Table 9.1)./3 Based on export prices f.o.b. in FMG./4 Includes reexported equipment and machinery./5 Based on import prices c.i.f. in FMG.7 Excluding consumer durables.

Source: INSRE and mission estimates.

Table 9.6: IMPLICIT NATIONAL ACCOUNTS DEFLATORS, 1970-1975

(1970 = 100)

1970 1971 1972 1973 1974/1 1975Y2

AggregatesGDP at market prices 100.0 103.5 106.6 119.4 147.3 155.1GDP at factor cost 100.0 103.7 106.8 119.7 148.4 156.6GNP at market prices 100.0 103.5 106.6 119.5 147.7 155.6GNP at factor cost 100.0 103.7 106.8 119.9 148.9 157.1

Value AddedAgriculture 100.0 108.3 111.8 129.2 191.1 208.1Mining 100.0 109.8 152.1 124.8 139.2 150.0Manufacturing 100.0 102.2 106.8 129.4 132.7 139.9Electricity & water 100.0 97.8 99.2 98.6 106.4 114.1Construction & public works 100.0 100.0 101.9 116.9 125.5 133.7

Transport, storage & communication 100.0 101.5 103.4 116.7 128.5 135.9Trade 100.0 98.3 102.4 113.5 126.5 122.6Banking & insurance 100.0 103.0 96.7 115.4 127.6 145.3Other services 100.0 100.9 101.9 103.0 105.4 110.8Public administration & defense 100.0 104.6 107.1 111.8 128.3 131.8

ExpenditurePrivate consumption 100.0 104.5 107.5 124.6 164.3 181.0Government consumption 100.0 103.6 106.5 112.8 131.9 135.5

Wages & salaries 100.0 104.6 107.1 111.8 128.3 131.8Goods & services 100.0 101.5 104.5 116.6 141.2 144.6

Gross domestic capital formation 100.0 103.5 106.9 115.6 135.5 139.6Gross domestic fixed capital formation 100.0 103.4 106.9 115.3 133.9 139.0


Exports of goods & nonfactor services 100.0 101.2 103.1 107.5 138.7 130.3Imports of goods & nonfactor services 100.0 104.1 106.2 117.0 176.6 181.2Factor income payments to & from abroad 100.0 103.4 106.9 114.3 128.7 133.3

/1 Preliminary./2 Provisional.


Table 9.7: INDUSTRIAL MINIMUM WAGES, 1974-1978

(in FMG per hour)

Zone and Category Effective date: 1 March 1974 1 March 1975 1 March 1976 1 March 1977 1 March 1978N S N S N S N S N S

I. Manual workers

Zone 1

Unskilled laborer (Ml) 51.00 57.80 *------------- -------------- unchanged ------------------------------- Semi-skilled laborer (M2) 61.20 68.00 *----------------------------------- " -----------------------------------Skilled worker (OSI) 69.70 76.50 73.10 79.90 74.80 81.50 *------------ unchanged ----------4

(OS2) 76.50 90.10 79.90 93.50 85.00 98.60 .--(0S3) 90.10 103.80 96.10 108.80 102.00 109.00 *---_-_-________ " ____----------

Foreman (OP1-A) 103.70 117.30 108.80 125.80 115.60 134.30 122.40 141.10 .- unchanged -*(OP1-B) 117.30 137.70 125.80 144.50 136.00 153.00 144.50 161.50 …----- " ----- (OP2-A) 144.50 187.00 154.70 197.20 164.90 210.80 178.50 221.00 *----- " ----- (OP2-B) 178.50 221.00 192.10 241.40 207.40 261.80 222.70 289.00 238.00 306.00

Supervisor (OP3) 187.00 289.00 224.40 316.20 261.80 346.80- 302.60 374.00 340.00 408.00

Zone 2

Unskilled laborer (Ml) 46.50 .. ------------------------------- unchanged -------------------------------Semi-skilled laborer (M2) 55.80 .. ----------------------------------- -----------------------------------

II. Clerical workers

Office worker, untrained (1-A) 51.00 57.80Office worker, basic literacy (1-B) 61.20 68.00Office employee with on-the-job training (2-A) 74.80 81.60Office employee with special on-the-job training (2-B) 85.00 98.60Clerk-typist, 30 words per minute (3-A) 102.00 119.00Clerk-typist, 50 words per minute (3-B) 122.40 141.10Specialized technician (4-A) 144.50 161.50Specialized technician (4-B) 178.50 221.00Office personnel, highly qualified (5-A) 238.00 306.00Office personnel, highly qualified (5-B) 340.00 408.00

Notes: Zone 1 = cities of Tananarive, Tamatave, Diego-Suarez and Ambohimanarina and town of Joffreville.Zone 2 = all other areas.N = newly hired personnel.S = personnel with seniority.

= not available.

Source: Bureau de Developpement et de Promotion Industriel, Guide de Drireur 1975.

madagascar: economic memorandum on current...

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