Export Processing Zones in Madagascar: the impact of the dismantling of clothing quotas on employment and labour standards

The success of Export Processing Zones (EPZs) or the Zone Franche in Madagascar is, with the exception of Mauritius, an isolated and unrecognized case in Africa. The Zone Franche has had a highly significant macroeconomic impact in terms of exports and jobs. Madagascar became the number two clothing exporter in sub-Saharan Africa. At its peek in 2004, the Zone Franche employed 100,000 employees. The final phase-out of the Multi-Fibre Arrangements in 2005 has had a negative impact on the Zone Franche. The export and employment growth has come to a halt. Our econometric estimates, based on first-hand data, show that average wages in the Zone Franche have become lower than in the formal industrial sector, other things being equal; labor standards are higher than average but are progressively being reduced in a context of increased international competition. As the example of Madagascar shows, EPZs can no longer be placed at the core of development and employment policies in Africa since the end of clothing quotas, although no alternative strategy has emerged yet.