Industrialization pact: Madagascar on the road to industrial growth
Following the first step taken on June 29, marked by a workshop to develop the pact between the private and public sectors, Madagascar made a historic move with the signing of the Industrialization Pact yesterday, July 30, 2023, thus sealing an ambitious vision for the country’s economic future.
This groundbreaking initiative unites the private and public sectors until 2040 to have industries contribute 30 % of the country’s GDP. This is a bold goal as industries only represent half of this target. By focusing on five priority industrial sectors – mining, agribusiness, textiles and free zones, energy, and essential oils – Madagascar is preparing for unprecedented industrial growth, sparking excitement and hope for the future.
Path to growth
Madagascar is indeed confronted with the significant challenge of raising the contribution of its industrial sector to the country’s economy in order to foster sustainable growth. Industry currently accounts for 15 % of the GDP, the ambitious goal of the Industrialization Pact is to double this figure within the next 20 years. This is a strong commitment from the private sector, represented by the outgoing president of the Syndicate of Industries of Madagascar, Hassim Amiraly, who sees in this pact a unique opportunity for cooperation between the private and public sectors to create an environment conducive to investment.
Five pillars of Industrialization
The Industrialization Pact is centered on five key industrial sectors, each with considerable potential for the Malagasy economy. First, mining, which holds significant mineral wealth and whose responsible exploitation can become a driver of sustainable growth. Madagascar has significant reserves of minerals such as nickel, cobalt, graphite, ilmenite, and zircon, which remain to be exploited.
Next, agribusiness, a strategic sector for the country, currently contributes around 25 % to the GDP. Madagascar has unique biodiversity, offering huge opportunities to develop agriculture and the agri-food industry. Agribusiness can create jobs and boost exports of agricultural products to international markets.
Textiles and free zones are also essential pillars of the Industrialization Pact. The textile industry contributes to 6 % of GDP, it offers abundant and skilled labor, thus offering rapid development and export growth prospects. Moreover, free zones are privileged territories for foreign investors, offering tax incentives and infrastructure dedicated to industrial and commercial activities.
The energy sector is a crucial pillar in supporting industrial growth. Madagascar relies mainly on fossil fuels (oil and coal) but actively develops renewable energies, particularly hydroelectricity and solar power. This energy development is pivotal to sustain Madagascar’s industrial growth and promote sustainability.
Lastly, the production of essential oils derived from Madagascar’s endemic plants, like vanilla, geranium, clove, and ravintsara, enjoys international renown. Sustainable exploitation of these natural resources could serve as a major economic and environmental lever for the country.
National Industrial Development Fund (NIDF)
Establishing the National Industrial Development Fund (NIDF) is crucial in the Industrialization Pact. This fund will finance innovative industrial projects, support business growth, and encourage research and development in key sectors. The private sector has actively contributed to the creation of this fund, which is a key lever to achieve the ambitious objectives of the pact.
Vision of partnership
The Industrialization Pact is based on a vision of a strong partnership between the private and public sectors. Hassim Amiraly, the outgoing president of the Syndicate of Industries of Madagascar, expresses hope for a well-founded relationship between the two sectors through this pact. Close collaboration between the two parties is crucial to create an environment conducive to investment and sustainable growth of Malagasy industries. Clarification and harmonization of laws concerning the NIDF, the Industrial Economic Zone (IEZ), and texts on investment and industrial development are essential to facilitate investor procedures and ensure the success of this partnership.
The Industrialization Pact opens a new economic era for Madagascar. With its focus on the five priority industrial sectors and the introduction of the National Industrial Development Fund, the country is positioning itself to attract investments and stimulate local industry growth. The private and public sectors’ determination to collaborate to achieve this pact’s ambitious objectives is a strong sign of commitment to a prosperous economic future. Madagascar is thus preparing for an industrial revolution that will shape the country’s future and create promising investment opportunities for economic players eager to participate in this major transformation.
