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Madagascar : External opening to stimulate the economy

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Madagascar : External opening to stimulate the economy

Promoting foreign trade

In the wake of past strategy failures, the emphasis now shifts to liberalization and global engagement.

The central idea is that foreign investment opportunities are substantial enough to overcome existing constraints and invigorate Madagascar’s economy. Analysis of two critical sectors-foreign trade and industry-reveals promising signs from the open-market approach. However, progress remains limited. Madagascar’s advantageous international environment alone does not account for its low level of outward orientation; internal supply constraints, beyond the reach of market mechanisms, play a significant role.

Evaluations underscore the structural limitations of the economy. Notably, the limited scale and inertia of exports, coupled with a heavy reliance on imported inputs, impede economic performance. Consequently, the state’s marginal role is inadequate to drive sustainable economic growth. This scenario perpetuates internal constraints, contributing to the stagnation of Madagascar’s economy.

Diversifying manufacturing sectors, such as agro-industry, could spur economic growth, create jobs, and reduce dependency on basic commodities. Moreover, expanding trade can facilitate technology transfer, driving technological advancement and productivity gains. These benefits, however, hinge on the degree of economic openness.

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