Madagascar’s Export Processing Zones (EPZs) play a central role in the country’s economic development, attracting export-oriented industries and creating thousands of jobs.
With a strong legal framework, attractive tax incentives, and access to major international markets through preferential trade agreements, these zones have become a cornerstone for investors seeking competitive production bases in the Indian Ocean region.
This article explores the legal foundations, key sectors, and export dynamics of EPZs in Madagascar, while outlining the strengths and challenges shaping their future.
tl;dr: Madagascar’s EPZs offer a robust legal framework, tax incentives, and access to major markets through agreements like AGOA and the EPA. The export sector—dominated by textiles, agro-products, and mining—accounts for about a quarter of GDP. Despite infrastructure and governance challenges, opportunities for diversification and investment remain strong, especially in manufacturing and ICT services.
The Legal Aspect of Export Processing Zones
Export Processing Zones (EPZs) in Madagascar is governed primarily by Law No. 2007-037 of January 14 2008, known as the “Zones et Entreprises Franches” (ZEF) law. This provides a specialized legal framework designed to promote export-oriented enterprises.
The Decree No. 2015-1096 specifies practical measures for implementation and establishes clear definitions for Free Zones and Free Enterprises. In this regard:
- A Free Zone refers to a geographically defined area that houses several Free Enterprises focused exclusively on exporting goods or services.
- Free Enterprises encompass industrial transformation companies, service providers, and intensive base production firms, with the requirement that at least 95% of their output is destined for export markets.
The law offers significant fiscal incentives, such as income tax exemptions for initial years followed by a reduced tax rate, exemptions from value-added tax and customs duties for imported inputs essential to production.
Notably, enterprises can obtain Free Enterprise status either by locating inside Free Zones or, under defined conditions, outside these zones, broadening the regime’s applicability across the country.
Preferential Trade Agreements for Exportation
Madagascar’s export trade is strongly supported by preferential trade agreements that provide duty-free or reduced-tariff access to major international markets.
Among these, the African Growth and Opportunity Act (AGOA) with the United States plays a crucial role, especially for the textile and apparel sector, enabling Malagasy products to enter the US market competitively.
The Economic Partnership Agreement (EPA) with the European Union allows broad access to EU markets with tariff preferences, covering key export products such as seafood, spices like vanilla and clove, and textiles.
Additionally, the Everything But Arms (EBA) initiative authorizes duty-free export to the EU for all products except arms, facilitating Madagascar’s position as a Preferred Supplier.
Main Export Markets in Madagascar
The principal export markets for Madagascar remain Europe- especially France, Germany, Italy, and the Netherlands – and the United States, with regional markets like South Africa and Mauritius also playing important roles.
These trade agreements and market relationships underpin Madagascar’s export-driven sectors and contribute significantly to its balance of trade.
Main Export Sectors in Madagascar
The dominant export sectors that benefit from the EPZ regime include textiles and apparel, which is the largest in terms of employment and export volume, providing jobs to over 90,000 workers.
Agro-industry and seafood processing constitute other major industries, with Madagascar renowned globally for its vanilla production, substantial outputs of cloves, and an expanding shrimp aquaculture sector.
Mining and extraction activities, including nickel and ilmenite, contribute to exports, alongside emerging sectors such as information technology and business process outsourcing, which are gradually gaining ground.
Significance of the Export Sector in Madagascar’s Economy
Exportations in Madagascar represent a significant part of the economy, accounting for around 23 to 27% of GDP in recent years, based on World Bank data showing exports of goods and services as a percentage of GDP at 26.87% in 2023 and 23.63% in 2024. This high export share underscores the sector’s importance to national income and foreign exchange earnings.
Regarding the textile and apparel industries within the Free Zone regime, they are among the primary export earners for Madagascar. The overall export sector, especially textiles and apparel, regularly represents between 20% and 30% of total export revenues, emphasizing the strategic economic importance of these industries for the country’s foreign currency earnings and employment.
Thus, Madagascar’s export sector, led by textiles, agro-products such as vanilla, and mining, plays a crucial role in the country’s economic structure, contributing a sizable share to GDP and serving as a main source of foreign exchange.
Madagascar Export: SWOT Analysis
Conducting a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis of Madagascar’s export industry reveals a range of factors shaping its current landscape and future prospects.
Key takeaways:
- Legal framework: Law No. 2007-037 and Decree No. 2015-1096
- Fiscal incentives: Tax holidays, VAT and customs exemptions
- Top export markets: EU, US, South Africa, Mauritius
- Leading sectors: Textiles, agro-industry, seafood, mining
- Export share of GDP: 23–27% (2023–2024)
- Main opportunities: Diversification, ICT, value-added exports
- Main risks: Political instability, climate shocks, AGOA renewal
Conclusion
Altogether, Madagascar’s Zones et Entreprises Franches legal framework underpins one of the country’s most vital economic engines centered on export processing.
Supported by preferential trade agreements and diverse export sectors, the regime offers compelling opportunities, balanced against operational challenges and external risks that require strategic management for sustainable growth.
If you’d like to learn more about Madagascar’s business environment, you can contact Madagascar Invest to receive a free copy of the Business Handbook. In addition, if you’re planning to establish a company within the Export Processing Zone (EPZ), Madagascar Invest can assist you throughout the setup process.
