During the 1960s and the 1970s, the textile industry was a top priority for the Government of Madagascar. The sector emerged as one of the fastest growing industries supported by domestic cotton supply. In the 1990s, the textile industry suffered from declining production shares due to inefficient state-owned companies and trade liberization. Subsequently, the Government focused on private sector development and on the establishment of export processing zones, where tariffs and quotas are eliminated and bureaucratic requirements. The measures taken resulted in a significant recovery of the textile and clothing industry. Mauritius redeployed textile sectors to the low-income country Madagascar.
During 2000 and 2005, garment exports were expanded. However, political instability affected the Malagasy textile sector severely and led to massive unemployment. Many foreign investors drifted away to competitors in Mauritius, Kenya and Asian countries. In 2004, a new investment drive led to economic recovery of the country. In 2005, new critical challenges emerged with the abolition of the Agreement on Textiles and Clothing and the Multi Fibre Arrangement, which led to the closure of several textile factories. However, under the African Growth and Opportunity Act, providing preferential US market access, the export share of textile and apparel products increased.
The current Malagasy textile sector benefits from a sound local business environment, technical skills, low wages and sufficient raw material supply, including cotton and yarn. Further, new investment flows into the local textile sector focus on developing the cotton value chain.