Madagascar's free trade zone federation (GEFP) has sounded the alarm: 200,000 direct jobs are now at risk in the country's export processing zones. The cause: a series of fiscal reforms introduced since 2023 that have altered the operating rules for exporting companies, threatening to undermine one of the island's main economic engines.
Fiscal Stability Guarantee Under Challenge
Law 2007-037 guaranteed free trade zone companies multi-year fiscal stability. According to the GEFP, successive modifications through finance laws since 2023 — new taxes, additional charges — contravene this commitment. Compounding the issue are delays in VAT reimbursements that are squeezing the cash flow of exporting companies. For the federation, this is no longer a theoretical risk: the first closures and activity reductions are already underway.
A Domino Effect Across the Economy
The GEFP notes that salaries paid in free trade zones cover essential needs: food, rent, school fees, transport and healthcare. One job in the export sector therefore irrigates the entire local economic fabric — transport providers, restaurants, suppliers and artisans. The threat hanging over 200,000 direct jobs represents, in reality, a shock affecting several times that number of people.
Demands Addressed to Government and IMF
The federation demands clear government commitments: clarification on the future of the free trade zone regime, an independent macroeconomic study on costs and benefits, a credible VAT reimbursement timeline, and prior consultation before any new fiscal measures. The GEFP is also calling on the IMF — whose influence on budget orientations is significant — to incorporate these impacts into its recommendations.
Why It Matters
Madagascar is simultaneously playing two contradictory hands: its head of state courts Egyptian investors during an official visit while its regulatory framework is undermining already-established industrial partners. This contradiction sends a warning signal to any investor considering a foothold on the island. Madagascar's business environment credibility depends on its ability to honour existing fiscal commitments before making new promises.
Sources: Newsmada.com, L'Express Madagascar, Midi Madagasikara.