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

Author

Listed:
  • Jean-Pierre Cling

    () (DIAL)

  • Mireille Razafindrakoto

    () (DIAL, IRD, Paris)

  • François Roubaud

    () (DIAL, IRD, Paris)

Abstract

(english) 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. _________________________________ (français) Le succès de la Zone franche malgache est un cas méconnu et unique en Afrique sub-saharienne, si on excepte l'Ile Maurice. La Zone franche a eu un impact macro-économique important en termes d'exportations et d'emplois. Madagascar est ainsi devenu le deuxième exportateur de produits de l'habillement en Afrique sub-saharienne. A son maximum en 2004, la Zone franche comptait 100.000 employés. Le démantèlement final des quotas imposes dans le cadre des Accords Multi- Fibres depuis le début de 2005 a eu un impact négatif sur la Zone franche. La croissance des exportations et de l'emploi s'est interrompue. Nos estimations économétriques, basées sur des données individuelles auprès des ménages de première main, montre que les salaires dans la Zone franche sont devenus inferieurs a leur niveau dans le reste du secteur industriel formel, toutes choses égales par ailleurs. Par ailleurs, les normes de travail hors salaires restent meilleures mais cet avantage est en réduction progressive, dans un contexte de concurrence internationale accrue. Comme le montre l'exemple de Madagascar, les zones franches d'exportation ne peuvent plus être mises au centre d'une stratégie de développement et d'emploi en Afrique depuis la fin des quotas textiles, bien qu'aucune alternative n'ait encore émerge.

Suggested Citation

  • Jean-Pierre Cling & Mireille Razafindrakoto & François Roubaud, 2007. "Export Processing Zones in Madagascar: the impact of the dismantling of clothing quotas on employment and labour standards," Working Papers DT/2007/06, DIAL (Développement, Institutions et Mondialisation).
  • Handle: RePEc:dia:wpaper:dt200706
    as

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    File URL: http://www.dial.ird.fr/media/ird-sites-d-unites-de-recherche/dial/documents/publications/doc_travail/2007/2007-06
    File Function: First version, 2007
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    References listed on IDEAS

    as
    1. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, vol. 26(6), pages 829-851, June.
    2. Gibbon, Peter, 2003. "The African Growth and Opportunity Act and the Global Commodity Chain for Clothing," World Development, Elsevier, vol. 31(11), pages 1809-1827, November.
    3. Cling, Jean-Pierre & Razafindrakoto, Mireille & Roubaud, Francois, 2005. "Export processing zones in Madagascar: a success story under threat?," World Development, Elsevier, vol. 33(5), pages 785-803, May.
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    5. Martins, Pedro S., 2004. "Do Foreign Firms Really Pay Higher Wages? Evidence from Different Estimators," IZA Discussion Papers 1388, Institute for the Study of Labor (IZA).
    6. International Monetary Fund, 2003. "Madagascar; Selected Issues and Statistical Appendix," IMF Staff Country Reports 03/7, International Monetary Fund.
    7. Kankesu Jayanthakumaran, 2003. "Benefit-Cost Appraisals of Export Processing Zones: A Survey of the Literature," Development Policy Review, Overseas Development Institute, vol. 21(1), pages 51-65, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Drusilla K Brown & Alan V Deardorff & Robert M Stern, 2013. "Labor Standards and Human Rights: Implications for International Trade and Investment," World Scientific Book Chapters,in: Regulation of Foreign Investment Challenges to International Harmonization, chapter 5, pages 153-195 World Scientific Publishing Co. Pte. Ltd..
    2. Nordman, Christophe J. & Rakotomanana, Faly & Roubaud, François, 2016. "Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar," World Development, Elsevier, vol. 86(C), pages 1-17.
    3. Staritz, Cornelia & Morris, Mike, 2013. "Local embeddedness and economic and social upgrading in Madagascar's export apparel industry," Working Papers 38, Österreichische Forschungsstiftung für Internationale Entwicklung (ÖFSE) / Austrian Foundation for Development Research.
    4. Marta Castilho & Marta Menendez & Aude Sztulman, 2015. "Poverty and Inequality Dynamics in Manaus: Legacy of a Free Trade Zone ?," Working Papers DT/2015/18, DIAL (Développement, Institutions et Mondialisation).
    5. repec:dau:papers:123456789/10601 is not listed on IDEAS
    6. Mireille Razafindrakoto & François Roubaud & Jean-Michel Wachsberger, 2014. "Jalons pour une économie politique de la trajectoire malgache : une perspective de long terme," Working Papers DT/2014/21, DIAL (Développement, Institutions et Mondialisation).
    7. Julia Vaillant & Michael Grimm & Jann Lay & François Roubaud, 2014. "Informal sector dynamics in times of fragile growth: The case of Madagascar," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 437-455, September.
    8. Morris, Mike & Staritz, Cornelia, 2014. "Industrialization Trajectories in Madagascar’s Export Apparel Industry: Ownership, Embeddedness, Markets, and Upgrading," World Development, Elsevier, vol. 56(C), pages 243-257.
    9. Mireille Razafindrakoto & François Roubaud & Jean-Michel Wachsberger, 2017. "Jalons pour une économie politique de la trajectoire malgache : une perspective de long terme," Working Papers hal-01653648, HAL.
    10. Ruwan Jayasuriya, 2008. "The Effects of Globalization on Working Conditions in Developing Countries : An Analysis Framework and Country Study Results," World Bank Other Operational Studies 11765, The World Bank.
    11. repec:dau:papers:123456789/7079 is not listed on IDEAS
    12. repec:dau:papers:123456789/4304 is not listed on IDEAS
    13. World Bank, 2010. "Burkina Faso - Promoting Growth, Competitiveness and Diversification : Country Economic Memorandum, Volume 3. Enhancing Growth Factors," World Bank Other Operational Studies 12359, The World Bank.
    14. Chandra, Vandana & Osorio Rodarte, Israel, 2009. "Options for Income-Enhancing Diversification in Burkina Faso," MPRA Paper 20928, University Library of Munich, Germany.

    More about this item

    Keywords

    Export processing zones; employment; wages; labour standards; Madagascar; zones franches; emploi; salaires; normes de travail.;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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