IMPACTS OF DOHA ROUND ON PEOPLE’S WELFARE by Dr. Hery RAMIARISON UNIVERSITY OF ANTANANARIVO MADAGASCAR 1

ECONOMIC AND SOCIAL BACKGROUND (1) •

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Globalization wave reached Madagascar at the end of the socialist regime. New policy swift in favor of the trinity “ Stabilize, Privatize, Liberalize”, in the mid-1980s. High and rapid growth of trade flows and FDI inflows Steady growth, extraordinary economic and social performance, attaining its height in 2008 2

ECONOMIC AND SOCIAL BACKGROUND (2)

FDI in SDR millions

Growth rate (%)

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ECONOMIC AND SOCIAL BACKGROUND (3) •

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2009’s political crisis: deepening poverty (92%), worsening HDI, gaining importance of informal sector (93% of total employment), falling per capita income. 85% of population living in rural area Madagascar remains a LDC and is more unlikely to free itself from the poverty trap despite being exposed to globalization wave. Objectives of the Survey: How do people perceive the impacts of globalization on their lives?

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METHODOLOGY Mix of (1) questionnaire and (2) semi-structured interview (focus group interview)  Focus on people’s reaction and perception on (1) daily transaction (selling/buying the basic staples: foods, clothing etc) (2) their preference for exported /imported goods and reasons (3) who benefit from these transactions (producers? consumers? buyers? importers? state? foreign capitals? …) (4) Export, import (esp. chinese products), FDI (incl. land grab), AGOA/EPZ 

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WHO ARE THESE PEOPLE? (1) Living in 5 regions that have their own specificities - Sambava/Antalaha: Primary commodities ,

- Moramanga: Mega nickel project (FDI) - Miarinarivo: agriculture - Mananjary/Manakara: trad. Fishing - Ilakaka/sakaraha: Precious stones

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WHO ARE THESE PEOPLE? (3)

1. Majority young and educated, with urban people relatively more educated 2. Living in a household of 4 to 7 members 3. Farmers, fishermen and miners 4. More than 2/3 are in directly productive activity (PRODUCERS) and 30% are in sales activity (SELLERS)

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IMPACTS OF GLOBALIZATION : Income and competition 1. Urban market is relatively more competitive as producers earn higher income than sellers (opposite trend in rural) 2. Regions highly exposed to globalization wave have relatively higher income. 3. Sellers and more educated persons are the most likely to earn higher income. WINNERS: URBAN POPULATION, OUTWARDORIENTED AREAS, SELLERS AND MORE EDUCATED PERSONS 9

IMPACTS OF GLOBALIZATION : Migration 120.00% 100.00% 80.00% 60.00%

more than 15

11 to 15 40.00%

6 to 10 3 to 5

20.00%

0 to 2

0.00%

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IMPACTS OF GLOBALIZATION : CONSUMERS Sourcing of basic needs Informal market

Open space market

Formal small market

Local shop

Street vendor

Kiosk Market (with Seller on the sidewalk roof)

Big and specialized shop

big shop

Nature Nature (free)

Specialized shop Supermarket

local shop (medicines) Hospital traditional medicines health center

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IMPACTS OF GLOBALIZATION : CONSUMERS Sourcing of basic needs 1. Importance of informal sourcing (60%): 89.3% for energy goods, 67% for clothes and 53.5% for food < == > Globalization failed to alter prevailing employment structure in the country: heavy weight of informal sector 2. Importance of formal sourcing for medicines < == > Globalization is crucial to improving life expectancy from 56.2 in 2008 to 66.9 in 2012. 12

IMPACTS OF GLOBALIZATION : CONSUMERS Basic needs and import preference 1. High import preference (59.5%) in average. 91.9% for clothes and 83.8% for medicines 2. Very low import preference for foods (3.5%) < == > Globalization has a positive outcome on living condition of poor consumers CONSUMERS ARE WINNERS? 13

IMPACTS OF GLOBALIZATION : Basic needs and main beneficiaries

Rice Processed food Medicines Energy goods Clothes

Foreig Local consu n Seller Broker Produ mer Produ cer cer 4 1 2 3 7 2 2

1 1

4 3

3 4

3 2

1 1

4 3

2 4

Gov

Other

5

6

6 6

5 5

7 7

5

5 6

6 7

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IMPACTS OF GLOBALIZATION : PRODUCERS Market and Price setting Informal market

Formal market

Brokers

Own consumption

At home, Relatives Market place Street

Shop, NGO

PRICE SETTING Producer

Buyer

Negotiation 15

IMPACTS OF GLOBALIZATION : PRODUCERS Market and price setting 1. Importance of sales to brokers: in export-oriented regions: 34.38% for SAVA and 54.1% for Ilakaka

2. High dependency on one channel (64.3%) < == > High risk of weak bargaining power

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IMPACTS OF GLOBALIZATION : PRODUCERS Market and price setting 1. In most cases producers set prices for any type of sales destination other than « Broker » 2. Negotiation is frequently used when selling to « Broker » BUT : BARGAINING POWER? Less competitive market; High dependency on singleway sales destination; importance of « Broker » in single-way sales destination < == > « Brokers » have more bargaining power

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IMPACTS OF GLOBALIZATION : PRODUCERS Market and price setting Globalization appears to favor rent seeker « Brokers » over producers. Producers in regions more exposed to globalization wave cannot fully benefit from it

WINNERS ? == > BROKERS 18

CONCLUSION 1. Positive outcomes: higher income in more exposed regions, improving the livelyhood and welfare through more competition in urban areas, and easy access to cheaper and higher quality clothes and medicines 2. Negative outcomes: (1) failure to stop the growth of informal sector, thereby excluding an increasing number of population, (2) favoring sellers, brokers at the expense of consummers and producers 19