VZCZCXYZ0001
RR RUEHWEB

DE RUEHAN #0345 1340413
ZNR UUUUU ZZH
R 140413Z MAY 09
FM AMEMBASSY ANTANANARIVO
TO RUEHC/SECSTATE WASHDC 2420
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS ANTANANARIVO 000345 
 
DEPARTMENT FOR AF/E - MBEYZEROV 
DOC FOR DESK OFFICER - BERKUL 
TREASURY FOR FBOYE 
STATE PLEASE PASS TO AUSTR FLORIE LISER AND TO PATRICK COLEMAN 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD AGOA EINV ECON MA
SUBJECT: AGOA SHIPMENTS IN FIRST QUARTER 2009 - MADAGASCAR 
 
REF: 08 ANTANANARIVO 608 
 
¶1. SUMMARY: Madagascar's AGOA apparel exports in the first quarter 
of 2009 increased by 6 percent compared to the same period in 2008. 
However, this trend will likely be reversed in April and May due to 
the current political and economic crisis, and the consequent 
departure of the GAP group, which accounted for almost USD 3.5 
million in 2008. END SUMMARY. 
 
GOOD PERFORMANCE, BUT SIGNS OF TROUBLE 
-------------------------------------- 
¶2. During the first quarter of 2009, Madagascar's AGOA apparel 
exports grew to USD 52.9 million versus USD 49.8 million during the 
same period in 2008, and USD 47.6 million in 2007.  This positive 
trend is primarily due to the performance of four companies: Kam 
Hing, M. Klen, Prime View, and Grove, which exported a total of USD 
35 million during this period.  Around 30 exporters shipped under 
AGOA in 2008, but this number has decreased to a current average of 
26 to 28 exporters per month.  According to the Malagasy customs 
service, no AGOA firms have closed yet, although several firms 
exporting to Europe have been forced to do so due to ongoing 
political unrest and reduced demand in their target markets. 
 
¶3. In mid April, a representative from the GAP Group informed Post 
that they would no longer purchase apparel from Madagascar because 
of the frequent delays caused by political turmoil.  In 2008, GAP 
Group purchases from five firms amounted to USD 3,449,021, somewhat 
lower than their 2006-2007 imports from 10 firms valued at over USD 
15 million.  Since the end of the multi-fiber agreement in 2005, 
which restricted their ability to purchase materials from China, GAP 
Group had already begun restructuring their operations in 
Madagascar, and moving some production elsewhere, including nearby 
Mauritius.  At present, two companies (Kam Hing and Cosmos) 
represent more than 90 percent of GAP's shipments, and will thus be 
most affected by their withdrawal.  As GAP is a well-known brand 
name, its departure will be a negative signal for Malagasy firms in 
the U.S. apparel market. 
 
¶4. The Malagasy customs service reports that since February 2009, 
several companies have re-exported part of their fabrics, 
accessories and equipment to their head offices based in China or 
Hong Kong.  MAZAVA Company, an American firm specializing in 
sportswear, announced that it will continue expanding in Mauritius 
instead of Madagascar due to the political situation. 
 
THREAT TO AGOA INELIGIBILITY 
---------------------------- 
¶5. COMMENT: Since the recent USTR warning on Madagascar's possible 
AGOA ineligibility, many companies have expressed their concerns to 
the Embassy and to the transition government.  The association of 
EPZ firms (GEFP) has been actively lobbying the transition 
government concerning the consequences of continued instability, and 
hope to strengthen their case following their recent trip to 
Washington, DC.  GEFP operators indicate that if Madagascar loses 
AGOA eligibility, orders will likely stop coming in around August, 
and production will wind down in the months to December.  While it 
is clear that some elements of the transition government are aware 
of these consequences, there has been no indication to date that the 
government will engage on this issue. 
 
MARQUARDT