Political Developments

In 1992 Professor Albert Zafy, of the Forces Vives Rasalama party, defeated Ratsiraka comfortably in presidential elections. Following parliamentary elections in 1993, Francisque Ravony was elected Prime Minister by the National Assembly. There followed three years of power struggles between the President and the National Assembly. President Zafy removed Prime Minister Ravony in 1995, and the National Assembly removed Ravony's successor in May 1996. President Zafy's third Prime Minister, Norbert Ratsirahonana, pushed through some important economic reforms leading to an agreement with the World Bank in 1996. President Zafy was impeached by the National Assembly and removed from office in September 1996.

Ratsiraka, standing against Zafy in presidential elections in December 1996, was re-elected. He consolidated his position in 1998 with a narrow victory in a referendum strengthening Presidential powers (and introducing Provincial autonomy) and by significant gains by the ruling AREMA party in fresh National Assembly elections, although the party did not obtain an overall majority.

Amid accusations of cheating and vote-rigging by both parties, the results of the December 2001 presidential election were announced on 25 January 2002. No candidate was judged to have achieved the required 50% of the vote to win outright. There was a second round run-off between the two leading candidates, President Ratsiraka and the Mayor of Antananarivo, Marc Ravalomanana.

Both candidates and their supporters became embroiled in a period of civil unrest that lasted for several months, and which had a huge impact on the people and economy of Madagascar. Although the African Union, President Wade of Senegal and the UN attempted to mediate a peaceful settlement between the two parties, events on the ground overtook these efforts.

Following a meeting between the two candidates in Dakar in mid-April, the High Constitutional Court carried out a recount of the first round votes and declared Ravalomanana the winner. He was inaugurated as President on 7 May 2002. Ratsiraka refused to accept this decision, and continued his campaign of isolating the captial city by blowing up bridges and maintaining barricades on the main roads. The armed forces increasingly gave their support to Ravalomanana who gained control of large parts of the island. Several members of the international community including the United States, France and the UK acknowledged Ravalomanana as President.

At their inaugural meeting in Durban on 10 July 2002, the African Union endorsed its earlier decision not to recognise Ravalomanana's administration and barred Madagascar from taking up its seat until new, fair and conclusive elections were held. In July 2003 the AU reversed its decision and re-admitted Madagascar.

Early Legislative Elections were held on 15 December 2002. President Ravalomanana's Tiako I Madagasikara won an outright victory taking 102 out of the 160 seats. Their National Alliance partner, Firaisankinam-pirenena, took 22 seats. A number of smaller parties took the remaining 34 seats. Four results were cancelled due to irregularities, and a re-run took place on 9 March. Former President Ratsiraka's party, AREMA, boycotted the election, although some candidates stood as independents and won 2 seats. The EU provided 89 election observers, the Francophonie Organisation provided 13 and the African Union provided a 2 man observer delegation. Both the EU and Francophonie announced the election to have been free and fair and welcomed the peaceful atmosphere in which the elections were carried out.

ECONOMY

Basic Economic Facts

GDP: US$4.0 billion (World Bank figure 2002)
GDP per head: US$356
Annual Growth: 6.0% (2004 estimate)
Inflation: 4.9% (estimate for first half of 2004)
Major Industries: Mining, Fishing, Paper, Tourism, Food/Tobacco, Chemicals, Petrol Refining, Cement, Metal Work
Main Imports: Machinery & Transport Equipment, Mineral Fuels, Foodstuffs, Consumer Goods
Main Exports: Coffee, Shellfish, Vanilla, Fish, Re-Exports from Freezone, Cloves, Pepper, Cotton, Chromite, Graphite, Sapphires.
Major Trading Partners: France, US, Germany, UK, Mauritius, China
Exchange rate: £1=FMG 15,259 (average for 2004)

Following the arrival in power of Ratsiraka in 1975, the Malagasy economy, which had been on a similar level to those of Thailand or Botswana, deteriorated steadily. According to the World Bank, over the last three decades Madagascar has recorded the fifth-lowest rate of GDP growth in the world (0.5% per annum). In recent years, it has improved owing to a programme combining resumed donor structural adjustment support, debt rescheduling, liberalisation, privatisation and the establishment of the Zone Franche, concentrating mainly on garment manufacture. In the period 1999-2001, despite wide-spread corruption, GDP rose from 4% to almost 6% pa. However, during the political crisis of 2002, many companies stopped operating and a large majority of the 160,000 Zone Franche employees lost their jobs.

Fiscal revenue is low (about 12% of GDP). This constraint on public finances makes the government budget dependent on donor flows. While new export industries have grown up – particularly prawn farming and value added in the Zone Franche - some traditional agricultural exports are experiencing problems from world prices (coffee) or ageing plantations. Imports have also been rising under liberalisation, putting pressure on the balance of payments: foreign exchange has been liberalised, import licences removed and some State monopolies ended. The new government pledged to address these issues in order to win back the confidence of international investors, and to regenerate the economy. To this end, a Decree issued in August 2003 cancelled all tariffs on agricultural, industrial, IT and electrical household appliances for the next 2 years in an effort to boost growth. Legislation is also being passed to allow non-Malagasy investors to buy land. The Government is committed to reducing poverty and fighting corruption, as well as to the principles embodied in the New Partnership for African Development (NePAD)

Agriculture dominates the Malagasy economy, accounting for 33% of GDP and employing 86% of the workforce. Although traditional crops of coffee, vanilla, cloves and pepper continue to make up a large part of agricultural exports, fish and particularly prawns have moved up the list. The industrial sector represents only 13% of GDP, focused on textile manufacturing, wood, cement, paper and soap products, and the processing of agricultural produce. Madagascar is rich in mineral resources, with sapphires, emeralds and ilmenite, and may have potentially interesting reserves of oil and natural gas. But virtually all mining activity is in private hands – with little benefit reaching the people. The Government is formalising the sector. Tourism will play an increasing role, and hotel accommodation is improving.

But generally weak infrastructure, particularly roads and transport, a lack of transparency in the legal system, and ambivalence over land tenure for foreigners could act as a brake on development unless the Government succeeds in changing mentality and in implementing its ambitious developmental plans – including a massive programme of road building and repairs. Ravalomanana’s government is addressing these issues, and is making slow but steady progress in the key sectors of manufacturing, tourism and agriculture. The recent increase in oil prices has badly affected the Malagasy economy, heavily dependent as it is on imported oil. The knock-on effect has been a huge rise in the cost of living together with a dramatic fall in the value of the Malagasy Franc.

INTERNATIONAL RELATIONS

Madagascar is a member of the Non-Aligned Movement and has traditionally looked as much to Asia as to Africa. Under Didier Ratsiraka's leadership, Madagascar maintained good relations with the Former Soviet Union and other communist countries without compromising Madagascar's independence. He refused naval facilities to foreign powers, and emphasised links with North Korea. The failure of the socialist option, and economic decay, left Madagascar no choice but to get back on terms with the IMF in the 1980s, and begin a policy of ‘ouverture' to the US and Anglophone world. In 1999 Mauritius offered to sponsor Madagascar's membership of the Southern African Development Community (SADC), the Madagascar authorities did not pursue the application. Didier Ratsiraka was a firm supporter of 'La Francophonie' and focussed his attention on the (largely Francophone) Indian Ocean Commission – promoting economic trade co-operation between the islands of the Indian Ocean, including Reunion (part of France) and COMESA, the Common Market of East Market and Southern Africa.

In contrast, President Ravalomanana has expressed an interest in establishing and expanding both regional and wider-world ties. Madagascar became an Associate Member of SADC in August 2004. Madagascar also belongs to the Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC) grouping.

MADAGASCAR'S RELATIONS WITH THE UK

Anglo/Malagasy relations are good. The Government of Madagascar has announced its intention to open an embassy in London (At present their ambassador to France is also accredited to the UK). There is warmth towards Britain for historical reasons (Church links remain strong), and a growing interest in learning English. The English Speaking Union’s Madagascar Office was inaugurated in April 2003. Improvements in BBC radio transmission in 1998, and transmission of BBC World Service Television News have enhanced Britain's profile and visibility. There is also greater interest by the business community in investment in Madagascar, and signs of increased interest in developing commercial links.

UK Development Assistance

Besides contributions to the European Union (EU), (International Monetary Fund (IMF), International Bank for Reconstruction and Development (IBRD), UN and African Development Bank (AfDB) multilateral aid programmes, British bilateral aid to reduce poverty through primary health care, education, community-based environmental management and capacity building is channelled through the Small Grant Scheme (£255,000 a year), FCO-funded human rights and environmental programmes and through some British Non-Governmental Organisations (NGOs).

Trade and Investment with the UK

It appears from the above figures that Madagascar has a surplus in trade with the UK. However, there is evidence that these figures understate the overall level of exchanges, notably with regard to British exports, which are often carried out through third countries (France, South Africa and Mauritius). Before the recent crisis, British companies, especially those based in Mauritius, were showing more interest in Madagascar. These include equipment suppliers, service companies/consultants and free zone textile factories. The government's effort to restart the economy is leading to renewed interest from companies in these and other sectors.

Recent Visits

Outward: HRH Princess Royal (December 1999).

Inward: Mme Lalaina Rakotoarisoa Director of International Relations at the Ministry of Justice and recently elected to the UN Human Rights Sub-Commission (June 2002); and Mme Lala Ratsiharivola, then Director-General for Studies and Reforms at the Ministry of Justice, and now Minister of Justice (September 2002).

HUMAN RIGHTS

Human rights have been generally respected. Madagascar has signed or ratified five of the six principal international human rights treaties. The death penalty remains in force, but it has not been invoked for over 40 years.