MADAGASCAR: Mining and tourism sectors set to create more jobs

[ This report does not necessarily reflect the views of the United Nations]

ANTANANARIVO, 3 Aug 2005 (IRIN) - Despite the strides made by Madagascar in turning around its economy, few new jobs have been created in the last two decades.

However, according to the World Bank's (WB) principal economist in Madagascar, Dieudonne Randriamanampisoa, the country's mining and tourism sectors could be the biggest job-spinners in the coming years.

According to the Bank, by 2008 the demand to fill an estimated 318,000 jobs will outstrip the supply of 293,500 available workers.

But the current situation does not evoke optimism. Unemployment rates in developing countries, such as Madagascar, are not considered a reliable measure of poverty because people with jobs often earn very low wages. The rate of underemployment, which takes hours worked, salaries and high poverty rates into account, is considered more reliable.

Underemployment stands at a high 30 percent to 35 percent in Madagascar, according to the WB. About 80.1 percent of the rural population is poor, earning less than a US dollar a day, while the poverty rate in urban areas is 51.8 percent.

Raza, a fruit vendor in the capital, Antananarivo, struggles to support his family of four. "There are no jobs. My wife washes clothes in other households, when she can, to bring in extra money - it is still very difficult to feed our family."

Rural households, predominantly dependant on agriculture, earn less than US $300 a year. The government's food-for-work programmes, such as road construction, ensure that poor rural dwellers "at least get some rice to take home", according to Rombo Ramasitera, a small-scale farmer in the northeastern province of Antseranana, "but only if there is some construction work going on".

Madagascar's rich but unexploited mineral reserves and cheap labour costs are expected to increase mineral exports from about $100 million to $150 million per year over the next ten years, the WB's Randriamanampisoa noted.

The mining sector currently provides direct and stable employment to at least 100,000 people in the rural areas, besides half a million seasonal jobs.

"Extending the sector to include gem polishing and cutting has the potential to create more jobs for the economy and an additional domestically added value," he commented.

The tourism sector employed 19,845 people last year, according to government statistics, bringing in just over $100 million.

"The sector has a lot of potential to grow, especially in ecotourism, but it has been constrained by the lack of infrastructure and good hotels," said Randriamanampisoa.

Hotel investors have been put off by the difficulty of acquiring title to land. In a bid to create a more business-friendly environment, the government has established a 99-year land lease for foreign investors.

Tourism has also proved beneficial to development, particularly in the rural areas, where a revenue-sharing initiative with local communities for the entrance fees to national parks has been launched.

"The government is currently working on a plan which will look at a broader implementation of these aspects," Randriamanampisoa added.

After decades of declining gross domestic product, Madagascar has gradually reformed its economy, particularly under President Marc Ravlomanana.

Trade liberalisation, including the removal of import restrictions and export licensing, the abolition of export taxes and the reduction of customs tariffs, has been achieved.

Liberalisation of the economy through state divestiture from key sectors, such as mining and fishing, and initiating the process of privatising major state-owned companies, including state-owned banks, has been welcomed by the WB and the International Monetary Fund.

"The Ravlomanana regime has also shown real commitment to combating corruption", Randriamanampisoa noted.

The economy was expected to grow by 6.4 percent this year to reflect increased agricultural production and higher investment in both tourism and infrastructure. However, according to WB, early indications suggest a four percent growth rate.

A dip in vanilla prices and uncertainty over export earnings after the abolition of the Multi-Fibre Arrangement (MFA), which guaranteed clothing and textile export quotas for global markets to many developing countries, have slowed growth. The clothing and textile sector generated at least 100,000 jobs.

Timely support from European investors has helped the clothing sector and the "affect has not been so bad - all the losses have been covered", said Randriamanampisoa.

"The country is expected to cut its spending by at least 30 percent this year, as the revenue has fallen," he added. Madagascar also needed to increase its level of tax collection.

Analysts have pointed out that substantial tax incentives to certain sectors of the economy had also been responsible for a drop in revenues.

[ENDS]