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Madagascar Opens to Foreign Buyers
February 22 , 2005

On February 18, legislators in Madagascar signed a piece of historic legislation, allowing foreigners to buy and export gems legally for the first time in recent memory.

Previously, visitors to the African island, which in the past 10 years has leaped from obscurity to become one of the world's leading sources of ruby and sapphire, had to either form a Madagascan company or go into partnership with one in order to export gems. But the bigger barrier to exports were the extended customs procedures, which were plagued by corruption and could take one to two weeks to complete. Most foreign buyers chose to simply smuggle gems out instead, and government representatives estimate that millions of dollars in gemstones were smuggled off the island every year.

The legislation was the direct result of the election of a new government, headed by President Marc Ravalomanana, in 2002. Ravalomanana, a businessman, declared that his goal was to make the country open to international investment and trade. As the second-largest contributor to Madagascar's economy after subsistence farming, reform of the gemstone industry was a top priority.

Under the new rules, foreigners who want to buy and export gemstones must obtain a special visa and purchase a $100 business license. Once the gems are ready to export, the buyers take the gems to a special office in the capital, Antananarivo, declare the value of the gemstones, and pay a 2 percent export tax on rough gemstones. Cut gemstones can be exported tax-free.

This is just one in a series of measures that the government has taken to liberalize the gem industry under the Mineral Resources Governance Project (PGRM), an World Bank-funded program put in place to develop the country's gem trade.

One measure is the "one-stop shops," places where authorized exporters can declare purchases, complete customs documents, and get authorization to export, a process which previously involved visits to multiple government offices in the capital. One of these one-stop shops opened in Antananarivo in January 2004, and more were expected to open shortly after the new legislation was passed.

The PGRM has also set up a lapidary school in the capital. Opened in October 2004, the school has already enrolled 70 students in its two-month cutting classes. A longer six-month course will train instructors, who will then open regional cutting schools in gem-mining areas.

In conjunction with the Gemmological Association of Great Britain (GEM-A) and the Gemological Institute of America, PGRM set up the Institute of Gemology of Madagascar. It's an allied teaching center of GEM-A, which will allow students to earn an FGA degree from the association. It's the first such school in all of Africa.

"We are firmly committed to making 2005 the year of gemstone liberalization in Madagascar," said Nadine Ranorosoa, national coordinator of the PGRM. The country has come far since 2002, and even representatives of the PGRM admit that there is still much to be done. But the welcome mat has been rolled out: Madgascar, say government officials, is open for business.

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January/February 2005 • Style: Gemmys Winners • Style: AGTA spectrum Awards • Selling: In the Pink - Retail Survey • News & Updates • In This Issue