VZCZCXRO9870
RR RUEHLMC
DE RUEHAN #0160/01 0470839
ZNR UUUUU ZZH
R 160839Z FEB 07
FM AMEMBASSY ANTANANARIVO
TO RUEHC/SECSTATE WASHDC 4311
INFO RUEHFR/AMEMBASSY PARIS 0805
RUEHNR/AMEMBASSY NAIROBI 0356
RUEHOR/AMEMBASSY GABORONE 0069
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 ANTANANARIVO 000160 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/FO AND AF/E 
STATE PASS USTR FOR PCOLEMAN 
USDOC FOR BECKY ERKUL - DESK OFFICER 
 
E.O. 12958: N/A 
TAGS: ETRD AGOA EINV ECON MA
SUBJECT:  AUSTR Encourages Madagascar to Build on AGOA Success 
 
 
¶1.  SUMMARY:  AUSTR Liser engaged public and private AGOA partners 
during her February 6-8 visit to Madagascar.  While the AGOA 
third-country extension will boost the apparel sector, Madagascar 
also shows promise in diversifying exports to the United States. 
High cost and reduced service in shipping was highlighted as an 
obstacle to Madagascar meeting its trade potential.  END SUMMARY. 
 
Policy Discussions with GOM 
--------------------------- 
 
¶2.  Assistant U.S. Trade Representative for Africa (AUSTR) Florie 
Liser and USTR Africa Director Coleman engaged public and private 
trade leaders during a visit to Madagascar February 6-8.  The 
Economic Development Board - Madagascar (EDB-M) hosted a policy 
discussion led by EDB-M CEO Prega Ramsamy and Advisor John 
Hargreaves, also including officials from the Ministries of Trade, 
Industry, and Mines at which the GOM's trade strategy was outlined. 
CEO Ramsamy said the time to register a company had been cut to 
three days by consolidating all relevant bureaus at the EDB-M 
office.  He said he has obtained "delegated authority" to vet and 
approve investment deals in priority sectors like tourism, 
agro-industry, infrastructure, and light engineering.  Mining, 
represented by Permanent Secretary Rajaonson, will remain separate 
from the EDB-M due to the technical expertise required in that 
sector. 
 
¶3.  Hargreaves, a long time apparel factory manager and AGOA 
advocate, predicted a 20 percent increase in AGOA apparel exports 
from Madagascar in 2007; creating 15,000 new jobs.  He also outlined 
the EDB-M's plan to host a regional apparel conference and expo 
November 7-9 to promote AGOA clothing suppliers and attract buyers. 
 
 
¶4.  In a separate meeting, the President's Chief of Staff, Ivohasina 
Razafimahefa, took on board AUSTR Liser's recommendation that a new 
Task Force on the Africa Growth and Opportunity Act (AGOA) be 
convened to complete a new Action Plan.  In this and other meetings, 
AUSTR Liser educated her counterparts, highlighting opportunities 
they might be missing in AGOA. 
 
December 12 AGOA Renewal Boon to Apparel Sector 
--------------------------------------------- -- 
 
¶5.  In visits to five apparel factories in the Export Processing 
Zones, AUSTR Liser saw the tangible benefit of AGOA:  thousands of 
jobs.  Most operators shared Hargreaves' enthusiasm that 
Madagascar's apparel sector would rebound sharply in 2007.  Having 
peaked in 2004 at over 110,000 jobs and about USD 400 million in 
AGOA apparel exports, the sector had declined in 2005 and 2006 
(septel).  However, spare capacity, expertise, and ample labor 
supply will allow factories to scale up quickly in response to 
buyers' orders. 
 
¶6.  The Minister of Trade, the President's Chief of Staff, and every 
factory manager thanked AUSTR Liser for successfully pushing the 
AGOA extension through Congress.  They appreciate that although AGOA 
apparel represents just two percent of U.S. clothing imports, the 
benefits of the trade preference must be thoroughly explained to 
lawmakers. 
 
Not Just Clothing 
--------------------- 
 
¶7.  AUSTR Liser also met investors and partners pursuing products to 
diversify Madagascar's AGOA exports, including:  gourmet rice, 
shrimps, essential oils, and processed agricultural products.  A 
common theme for all sectors was finding niches based on quality. 
 
¶8.  The pending gourmet rice deal with U.S. importer Lotus Foods is 
a powerful demonstration of the continuity and effectiveness of U.S. 
development strategy in Madagascar.  Starting over a decade ago, 
USAID (via Landscape Development Interventions) created farming 
cooperatives and established agricultural extension centers to 
target dual goals of ending slash-and-burn practices and increasing 
rural incomes.  The subsequent USAID Business and Market Expansion 
project stands on LDI's shoulders, helping cultivators diversify and 
find financing and markets.  Building on this sturdy foundation, the 
Millennium Challenge Compact is facilitating Lotus Foods' contact 
with the Kolo Harena farmer's association.  The final piece of the 
puzzle, dependable market access, has been guaranteed by AGOA for 
the last five years and is now maintained for several growing 
seasons to come.  In this way, conservation, production and trade 
capacity, finance, and market access combine to reduce poverty. 
 
Key Challenge:  Inadequate Shipping Service 
 
ANTANANARI 00000160  002 OF 002 
 
 
------------------------------------------- 
 
¶9.  Andry Ralijaona at the Presidency, a former shipping executive, 
and every factory manager, identified shipping costs and lead times 
as a key challenge to Madagascar's competitiveness in delivering 
apparel to the U.S. market.  Major shipping lines like Maersk and 
P&O Nedloyd call infrequently at Madagascar's Port of Tamatave. 
Exported containers must be transshipped at least once, usually in 
Oman or South Africa, before crossing the Atlantic - taking 30 days 
to the East coast and 45 days to the West Coast.  Nova Knits, maker 
of fine cashmere sweaters, often fills orders by air freight at 
great expense to meet deadlines.  Importing raw materials like yarn 
and fabric to the Export Processing Zone also wastes time; a 
Madagascar-bound container from China arrives in up to 30 days, 
compared to only 10 days for nearby Mauritius and Sri Lanka. 
 
¶10.  Our contacts agreed with AUSTR Liser's point that producers 
across the region should cooperate to improve their bargaining power 
with shippers.  They welcomed the AUSTR's offer to encourage the 
shipping majors to expand service to Africa, both to nurture a 
growing market and support AGOA's objective of poverty reduction. 
Our contacts in Madagascar, representing suppliers in the number 
three non-oil AGOA country, understand well that although a tiny 
proportion of world shipments, AGOA apparel represents over half a 
million jobs in Africa. 
 
Comment: 
-------- 
 
¶11.  AUSTR Liser's visit offered tremendous encouragement to trade 
policymakers and operators, reinforcing American commitment to 
market access for African development.  She also educated her 
interlocutors on the need for diversification, opportunities for 
capacity-building assistance, and strategies to attract investment. 
With a half-decade of democratic stability, consistent donor 
support, and slow economic reforms, Madagascar may be positioned to 
embark on a period of accelerated growth.  President Ravalomanana 
and his senior team must act quickly to facilitate foreign 
investments, focus on job creation, and increase exports.  AUSTR 
Liser suggested several necessary steps; with the continued support 
of the Competitiveness Hubs, the Mission will work with our Malagasy 
counterparts to follow through.  END COMMENT. 
 
SIBLEY