Context Note
Textile and Rural Development
3rd Government Retreat
May 6-7-9, 2005
April 13, 2005
Brief history of the Malagasy Textile sector:
The origin of the textile industry in Madagascar goes back to the beginning of the sixties. A
number of textile units were born in that period and operated with success on a relatively
protected local market (specially from the 70s onwards). The main actors were then in that
period: Cotona, Sotema, Fanavotana, Samaf, Somacou, Tisma, Sumatex, Sobama,…
As the Malagasy economy, and more specifically the textile sector, became more open by the
end of the 80s, the situation turned upside down:
- Increase in import and, in particular, in fraudulent import,
- Emergence of import in second hand clothes and of ready-made clothes
industry thus reflecting the fall in purchasing power among the Malagasy as
regards the need to be clothed cheaply,
- on traditional market of Lambahoany (loincloths) , emergence of fakes.
Évolution du Marché Textile Malgache et part des Importations
1993 à 2002
93 94 95 96 97 98 99 00 01 02
IMPORT 34 42 54 57 63 65 66 66 78 82 Observations :
Part croissante des importations au
détriment des opérateurs locaux
(essentiellement à l ’heure actuelle
COTONA, SOMACOU et dans une
moindre mesure SAMAF)
COTONA 22
22 La part de marché de Cotona passe
de 22 % à 8 % sur la période observée
21
24 Une relative stabilité de la
23 20 20 18 consommation par habitant (entre 1.1
AUTRES et 1.2 kg/an/capital)
(SOTEMA,SOMACOU
SAMAF …) 18 8
TOTAL 100 100 100 100 100 100 100 100 100 100
TOTAL (Ktonnes )13.4 13.4 13.0 13.1 16.4 15.6 17.6 16.0 18.0 11.1
Consommation 1.1 1.1 1.0 1.0 1.2 1.1 1.2 1.1 1.2 0.7
En kg/hab/an
* Chiffre en dˇcalage par rapport aux annˇes prˇcˇdentes et sans doute le reflet du dˇstockage sur 2002
The opening of Madagascar to international trade at the beginning of the 90s (and the deriving
frauds) brought about a new composition of the Malagasy textile sector with the
disappearance of many industrial actors in that industry. Besides, the Malagasy State also
experienced the repercussions of such industrial de-structuring through a decrease in tax
revenues (Corporation taxes, trade tax, least employment related tax losses) and which were
no doubt only partly compensated by import tax revenues.
Even if traditional instruments for economic analysis sometimes demonstrate that such
opening to international trade may both destroy the local industrial tissue and have a positive
net effect over the overall economic welfare of a country, such a view does not take account
of indirect effects, namely those of the impact on industries upstream and downstream the
value chains involved. It is certain that the weakness in the Malagasy value chain of cotton
agriculture partly results from the gradual disappearance of the local processing industry base.
Cotona is currently practically the only local customer of the cotton company Hasyma.
While the internal market was increasingly dominated by textile and second hand clothes
import, the Malagasy Government by the end of the 80s took the initiative to create a Free
Zone thereby allowing the settling of significant capacities for making ready-made clothes
and therefore providing local textile units with “export” commercial outlets. Within about ten
years, close to 100,000 jobs were created in that value chain. The year 2004 is the record year
in terms of exports with over US $400 Million, of which close to 70% are aimed for the
American Market.
Malagasy Textile Exports towards Europe and the United States
U.S. $ Millions
450
400 402
350
333
300
275
265
250
200 206
189
150
100
50
0
1999 2000 2001 2002 2003 2004
American 22% 70%
Market Share
Export growth continued after the 2002 political crisis and this reflects the soar of AGOA
preferential agreements and the maintenance of the quota based regime until the end of the year
2004.
The share of textile in the whole Malagasy export is close to 40% in 2004, reflecting the weight
of this value chain in the economy of the country. Furthermore, the level of employment in
the textile free zone accounts for about one third of jobs in the private formal sector.
2003 U.S. Europe + Row World
(in U.S.$ Millions )
Textile (apparel 61 + 62) 179 115 294 Share of textile exports
Vanilla ( 0905) 92 97 189 :
Srimpss…( 03 ) 0 128 128
Tuna (1604) 0 42 42
Spices (excl. Vanilla 09 excl. 0905) 1 34 35 - 36 % in 2003
Precious stones ( 71) 1 13 15 - About 40% in 2004
Cotton ( 52 ) 0 12 12
Cashew nuts ( 08 ) 0 11 11
Others (*) 3 88 91
Total 277 540 816
Prospects for the Malagasy textile sector
While the year 2004 is the apex of Madagascar performance as regards textile export volume, this
brings to a close the long period during which Madagascar and other countries benefited from
quota based measures that restrict the textile export from some Asian countries and namely from
China to the United States. In fact, it was the whole Sub-Saharan area that benefited from such a
quota based boosting effect that quite obviously occurred well before the effective implementation
of the AGOA treaty – the flagship product being the pants segment.
This new textile era at the global level therefore means for the whole Sub-Saharan area diluting
the ACP and AGOA treaty related benefits. While Madagascar still benefits from an exemption
advantage as regards customs duties for apparel and clothes towards the United States, (from 5 to
15% of the selling price of the ready made product) this is not self-sufficient to ensure the
competitiveness of the Malagasy textile sector.
The quasi-total liberalization of the sector of the textile sector on a global level will by all
hypothesis exacerbate competition in the coming years and emphasize further the key competitive
factors of Madagascar in the textile trade. The whole value chain is involved in cotton,
Processing, and ready made clothes manufacturing. Indeed, the probable end of the LDC clause
that currently allows a large number of units to get supplied in threads and fabrics of Asian origin
will oblige the same units to find supply solutions at a local or regional level. Currently while it is
very difficult to find threads and fabrics of export quality in Sub Saharan Africa, in Madagascar,
only Cotona is in a position to reach the level of quality requirement from European and American
orders. Conversely its capacity currently meets only part of needs in threads and fabrics in the
Malagasy free zone (warp and weft, knitwear) and thread would require a very significant increase
in spinning, weaving and finishing capacities. Beyond constraints related to international treaties,
the large international clients (of GAP type) increasingly tighten their requirements in terms of
deadlines. The textile orders given in Madagascar have to be fulfilled in increasingly shorter
deadlines, making it extremely difficult, even impossible in some cases to get supplied with raw
materials from Asia. Therefore, in the long run, the only genuine solution is that of “One Stop
Shop”. This is in fact the major expectation among international buyers as regards Madagascar,
because the latter are the ones who are aware of Madagascar assets in the textile sector. Indeed, all
long term competitiveness components exist in Madagascar and are only waiting to be exploited.
The real topic to be dealt with is therefore that of consolidating the Malagasy textile value chain,
what is more commonly called considering and operating the textile sector from a vertical
viewpoint (“verticalisation”). The goal is to strengthen each of the components, that is to say :
- Cotton growing
- Processing activities (spinning, weaving, and finishing)
- Ready made clothes making
The vertical integration to some extent exists over the Warp and Weft segment but not as regards
the Knitwear segment that accounts for more than half of the Market of the Malagasy Free Zone.
Regarding the Warp and Weft segment, it is noted that the vertical integration degree
deteriorated from 2003 to 2004. Despite the good performance of the single Malagasy exporting
representative of the value chain upstream, that is COTONA ( +36% in sales figure. and +53%
as regards the export quality export fabrics from 2003 to 2004) the overall integration rate
moved from about 12% to 7,5%. COTONA progress between 2003 and 2004 operated on other
markets (Mauritius Free Zone, Asia, Grand Export). Such figures are in large contrast regarding
the American and European markets :
2003 2004
-U.S. 5% 1,5%
-Europe 30% 25% (Warp and Weft Segment only)
-Total 12% 7,5%
Such topics have already been the object of multiple studies over the last years but what is
primordial in GEFP years is to put into prospect this whole knowledge as part of a more global
strategic study and the mission of which is to define a five year plan for the Malagasy textile
sector strategy. The efficiency of such an approach requires a strong Public Private partnership
that may, if any, speak in one same voice to sell the Malagasy Textile among large international
orders. This first phase of strategic orientation and action plans may very rapidly be the object of
a communication without even waiting for the complete implementation of the strategic plan.
GEFP deems that communicating such a common Public Private vision on the Strategy of the
Malagasy Textile is likely to reassure and motivate the investors in the sector by putting into
prospect the way to go through in order to really establish the leverages for competitiveness in
the Malagasy textile.
By way of example GEFP has already identified five themes that may be addressed in the
framework of overall textile status.
Cinq Pistes pour Redynamiser le Secteur Textile Malgache
1 2
INFRASTRUCTURE COTON
Mise en place dÕ syst¸me de tarification compˇtitif pour
un Crˇation d Õ organe reprˇsentant les diffˇrents
un
les gros consommateurs dÕˇ ergie dans le textile et don Õ
n t ŅstakeholdersÓde la fili¸re et donÕ lÕt objectif serait de
la vocation est essentiellement exportatrice . l
dÕˇaborer un plan dÕ action pour redynamiser cette
fili¸re tout en privilˇgant le textile Malgache
Dˇmarche similaire pour tout ce qui touche aux aspects
logistiques.
3 4
FINANCEMENT REFONTE DE LA LOI SUR LES ZONES
FRANCHES
un
Mise en place dÕ fond de modernisation permettant aux
intˇrets bonifiˇs
acteurs de la fili¸re de bˇnˇficier de taux d Õ ..avec entre autre des avantages favorisant la
fili¸re amont du secteur haute intensitˇ
et
intˇrets compˇtitifs pour les
Mise en place de taux d Õ
financements court terme de lÕ exploitation et ˇgalement
capitalistique
pour le long terme Refonte du Code des Douanes
5
FORMATION