Agriculture, including fishing and forestry, is the mainstay of the Madagascar economy, accounting for 34 percent of Gross Domestic Product (GDP) and contributing more than 70 percent to export earnings. Industry features textile manufacturing and the processing of agricultural products. Growth in output in 1992-97 averaged less than the growth rate of the population. Growth has been held back by anti-government strikes and demonstrations, a decline in world coffee demand, and the erratic commitment of the government to economic reform. Formidable obstacles stand in the way of Madagascar's realizing its considerable growth potential; the extent of government reforms, outside financial aid, and foreign investment will be key determinants.
Madagascar's sources of growth are tourism; textile and light manufacturing exports (notably through the EPZs); agricultural products and mining. Madagascar is the world's leading producer of vanilla and accounts for about half the world's export market. Tourism targets the niche eco-tourism market, capitalizing on Madagascar's unique biodiversity, unspoiled natural habitats, national parks and lemur species. Exports from the EPZs, located around Antananarivo and Antsirabe, consist the most part of garment manufacture, targeting the US market under AGOA and the European markets under the Everything But Arms (EBA) agreement. Agricultural exports consist of low-volume high-value products like vanilla, litchies and essential oils. Madagascar is the largest cinnamon market in Africa. Madagascar also is a large exporter of coffee.
A small but growing part of the economy is based on mining of ilmenite, with investments emerging in recent years, particularly near Tulear and Fort Dauphin. Mining corporation Rio Tinto Group expects to begin operations near Fort Dauphin in 2008, following several years of infrastructure preparation. The mining project is highly controversial, with Friends of the Earth and other environmental organizations filing reports to detail their concerns about effects on the local environment and communities.
Several major projects are underway in the mining and oil and gas sectors that, if successful, will give a significant boost to the Malagasy economy. In the mining sector, these include the development of coal at Sakoa and nickel near Tamatave. In oil, Madagascar Oil is developing the massive onshore heavy oil field at Tsimiroro and ultra heavy oil field at Bemolanga.