Madagascar Liberalizes Gem Trade

February 23, 2005

Madagascar Liberalizes Gem Trade

Madagascar's new regulatory reform and mining policy dismantles old barriers to trade in gemstones, announced Director of Mines and Geology M. Pamphile. The new mining policy was signed by Madagascar President Marc Ravalomanana on Feb. 18. Past regulation was widely held to be a disincentive to foreign investment, responsible for high levels of corruption in Madagascar’s gem markets and that much of the country’s tax revenues were being skirted. Until the passage of the reforms, it was technically illegal for foreigners without locally registered companies to purchase gems in Madagascar.

"That's why this is a big deal," says Tom Cushman of Allerton Cushman, Sun Valley, ID, who specializes in gemstones from Madagascar. Cushman has advised Madagascar's government on developing the gems and minerals sector for the past few years. "Madagascar is a mini-continent, bigger than California or France. It's got everything except for tanzanite, and who knows, it might have that too. Large-scale mining companies including RTZ, De Beers and Majescor are actively looking for diamonds and other minerals. With these new reforms, Madagascar is shedding its wild, wild west image and developing itself as the new frontier for gemstones.

"We are firmly committed to making 2005 the year of gemstone liberalization in Madagascar," said Nadine Ranorosa, Madagascar's national coordinator, Minerals Resource Governance Project (or PGRM). PGRM began with a $35 million loan to the sector, approved by the World Bank last year. "The development of this important sector has been constrained for too many years by restrictive regulations that have resulted in smuggling of our high quality stones out of the country," she said. Ranorosa spoke at the International Colored Gemstone Association Congress held in Bangkok, Thailand, Feb. 18-21.

"PGRM's goals are to open the gemstone sector to foreign trade. We will achieve this through three steps," Ranorosa said. "First we will facilitate gem trading for both Malagasy and foreign traders.” Ranorosa described the opening of one-stop-shops or markets in key cities around Madagascar, where safety, customs, package sealing and shipping could be arranged.

"Second, we will increase value-added projects in Madagascar," she said. Madagascar aims to train 15 instructors and 70 students in lapidary arts, mostly based near Antananarivo, the nation's capital, a process near completion in its first phase. A gemological school, in partnership with the Gemmological Association of Great Britain and Gemological Institute of America, is open and a state-of-the-art gemological testing laboratory will open this fall.

"Finally, we want to reduce corruption and smuggling in the sector," Ranorosa said. This will be implemented through streamlining and simplifying regulations, and providing incentives for buyers through low taxes. Officials say an easily paid buyer's license and subsequent 2% tax will levied on rough materials, while there will be no tax on goods fashioned in Madagascar.

"Madagascar is truly open for business," says Cushman.

by Robert Weldon, G.G.

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