Madagascar - Overview of economy

Although possessed of a temperate climate and variety of natural resources, Madagascar remains one of the poorest countries in the world. Its economic problems are daunting, and have been compounded by many years of

stagnation and decline. From 1971 to 1991 Madagascar dropped from the world's 30th poorest nation to its 10th poorest, with a fall in GDP per capita across the same period of 40 percent. Only in the late 1990s has Madagascar really begun to turn this trend around, but progress is expected to be slow, and major set-backs can still be expected.

Still predominantly agrarian, agriculture accounts for four-fifths of the workforce (mostly at subsistence level) and one-third of GDP. But population pressure combined with poor resource management has caused serious damage to Madagascar's ancient and highly delicate ecosystem, and deforestation and soil erosion are pressing concerns. By the late 1980s it was estimated that only 1 percent of the original wilderness remained.

Agriculture also suffers from droughts, locust plagues, and cyclones. A series of 3 particularly savage cyclones in early 2000 affected more than a million people and caused damage estimated by the World Bank to be near US$137 million. Growth, which had been forecast at 5.3 percent for 2000 (after a 4.7 percent rate in 1999), only reached 4.8 percent, leaving the country still crucially dependent on foreign aid and debt relief . The cyclones' devastating economic consequences, especially on cash crops such as coffee and vanilla, will be felt for years to come.

Other challenges include a limited and badly antiquated road system and rail network that are wholly unequal to the challenges of Madagascar's weather and terrain. The difficulty of transport, which in the monsoon months can leave large parts of the country inaccessible, is a major obstacle to commercial activity. But also inadequate is Madagascar's bureaucratic infrastructure . The civil service tends to be unresponsive and inefficient. And poor policing and corruption in the judiciary continue to render property and contract rights insecure. These factors are formidable disincentives for much-needed investment in the economy.

Madagascar's hope rests on energetic restructuring of its economy to reduce the national debt , stimulate the private sector , and encourage foreign development. Industries targeted as strategically central to this mission are Madagascar's fledgling manufacturing sector (especially garments and textiles) and its unique environment, with " eco-tourism " showing signs of real revenue promise.