GOVERNMENT AND NATURAL RESOURCES

MADAGASCARPresenter: Liankanto RANAIVOSON –ID: 156748

Chonnam National UniversityGraduate School of Business,

MBA in Community Development and LeadershipSubject: Trade & Economic Development in Developing Countries

OUTLINE

1. Overview2. A glimpse of Madagascar: natural resources (renewable and non

renewable), export, economic potential values3. The Government: economic and political system, issues, its role

in the economy

OVERVIEW OF MADAGASCAR

The 4th largest island in the world (587,040 sq km) Sub-Saharan Africa  in the Indian Ocean Population: 24 million (Malagasy) Capital: Antananarivo (1.987 million habitants) Density (2015): 40,5 ppl/km2 Currency: Malagasy Ariary (MGA) (1 USD = 3,200 MGA) GDP at market price (2014): Total: $10,59 billion GDP per capita (2015): $449 (Low income)

NATURAL RESOURCE CAPITAL

There are two forms of natural resource capital:Renewable - like forests or fish populations Non-renewable - like oil and minerals.

WILDLIFE TRAVEL & TOURISM: 15,5% OF TOTAL GDP (2015)

Madagascar is widely known for its unique biodiversity: home to thousands of plant and animal species found nowhere else in the world (5% of the world’s biodiversity), Madagascar is now among the hotspot because its biodiversity is highly threatened

Wildlife (fauna, flora), stunning landscapes, natural rainforests and wonderful beaches…

For instance: 6 of the 8 species of Baobab in the world are in Madagascar, one in Africa and one in Australia

NATURAL RESOURCES (RENEWABLE AND NON RENEWABLE)

MINERAL POTENTIAL: Strong nickel, copper and platinum group metal anomalism have been identified in rock chips and soil

Coal (potential has been estimated to contain as much as 100 Mt of good quality coal), Bauxite (estimated at containing 100 Mt of bauxite), Iron (400Mt ), Sapphires (Madagascar has the world’s largest reserves of sapphires), Chromite, Gold (Madagascar is estimated at producing as much as 70 tons of Gold in total)

Water bodies (lakes and rivers) Mangroves and coral reefs Wood (nearly 10 million hectares of intact, native forests and precious wood

species) Fisheries

EXPORT : 30% OF THE TOTAL GDP (2014)

COMMODITIESAgricultural exports: Coffee, Vanilla (one of the world’s vanilla biggest vanilla producers), Shellfish, Sugar, Cotton clothes, textilesMineral exports: Gemstones, Graphite, ChromiteExports: $2.187 billion (2014) TOP EXPORT DESTINATIONSFrance, United States, Belgium, Netherland

France US

Belgiu

m

Netherl

ands

South

Africa

Japan

South

Korea

China

German

y

17.7

8.8

6.8 6.4 5.7 5.4 5 4.8 4.5

Madagascar Export- partners (2014)

ECONOMIC SIGNIFICANCE OF NATURAL RESOURCES

The economic significance of natural resources depends upon the magnitude of two basic variables: current flows of income (function of production costs and market demand) and potential future flows of income (natural resource endowments and management planning)When well-managed: Contribution towards fiscal revenue, income and poverty reduction Employment and job creation potential Value of ecosystem services (for the renewable resources)Natural Capital Approach: Renewables—if managed sustainably - yield an increment of resources that can be

harvested indefinitely into the future. Non-renewable resources can by definition only be depleted, as they do not

regenerate themselves over humanly meaningful time spans

THE GOVERNMENT: ECONOMIC AND POLITICAL SYSTEM The economy of Madagascar is a market economy and is supported by agricultural industry and emerging tourism, textile and mining industries.

Since Madagascar’s independence (1960), the political situation has been marked by struggle for control. Assassinations, military coups and disputed elections featured prominently. Madagascar is usually a semi-presidential representative democratic republic, whereby the Prime Minister of Madagascar is head of government, and of a pluriform multi-party system.

THE GOVERNMENT: ISSUES

Political problems: Although there is a struggle for control, there is also an overall dominance of the President and his party. Majority of the 184-seat parliament (Senate and National Assembly) are given to the politicians belonging the ruling party

The major power: The ruling party (the President), the government (and the politicians) => Ravalomanana’s regime, Rajoelina’s regime and the current President (4th republic): because they have the power and the money

Madagascar is dealing with a serious issue of corruption, despite the fact that during the regime of RAVALOMANANA, independent anti-corruption agency BIANCO was established

Suggestions for corruption: A severe discipline should be set, from the bottom to the top, regardless of who you are

GROSS DOMESTIC PRODUCT COMPOSITION GDP - composition, by sector of origin:

Agriculture (farming, fishing, and forestry): 26.5%

Industry (mining, manufacturing, energy production, and construction): 16.6%

Services (government activities, communications, tourism and travel, transportation, finance): 56.9% (2014 est.)

27%

17%57%

GDP - composition, by sector of origin

AgricultureIndustryServices

ECONOMICAL EXPLOITATION: ISSUES Government plays the essential role in putting into place policies that ensure that resources contribute to the long-term economic development of nations, and not only to short-term revenue generation.

ÞThere is a lack of infrastructure to service these mineral deposits for economical exploitation

ÞIn 2013, Madagascar exported $2.21B and imported $3.34B => a negative trade balance ($1.12B). In 2013 the GDP of Madagascar was $10.6B.

In the annual budget, priorities are set on:1- Education2- Health3- Defense

CONCLUSION & SUGGESTIONSÞMadagascar has a high potential of economic growth

ÞHowever, despite this enormous living lab of natural resources, 80% of the population is poor (less than 2$ a day)

ÞSuggestions are : Þto establish resource funds for future generations, in which resource revenues are invested

internationally;Þto invest budget surpluses in human capital (education) and infrastructure and innovation;ÞTo ensure sound institutions, including high quality civil services and low levels of corruption

ÞBecause that desperate reality means that there is hope for Madagascar because it is an island which is open to new businesses

REFERENCES & THANK YOU http://data.wordbank.org http://fortuneofafrica.com

The world fact book http://www.oecd.org/