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Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).

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MADAGASCAR

FY 1998 Development Fund for Africa	. . . . . . . . . . . . . . . . .	$16,500,000
FY 1998 P.L. 480 Title II	. . . . . . . . . . . . . . . . .	$3,086,000

Introduction

The international donor and scientific community has identified Madagascar as the single highest biodiversity conservation priority in the world due to its combination of high diversity, uniqueness and degree of threat. High population growth, rampant poverty and poor governmental policies have led a frontal assault on one of the planet's most exceptional sources of biodiversity. Eighty percent of Madagascar's flora and fauna exist nowhere else on earth and their agricultural, pharmaceutical, and commercial potential still is neither fully known, nor even partially exploited.

Good news is on the rise. Madagascar, the world's fourth largest island with a population of 13.3 million, moved peacefully from a dictatorship to a multi-party democracy, while making important, if uneven, strides toward a free market economy. High inflation has been reduced in the past two years and a structural adjustment program was signed in December 1996 with the International Monetary Fund (IMF). Supporting these positive political and economic trends, the USAID program aims to stimulate private investment and employment, attack the longer-term causes of poverty, slow population growth and improve family health. Together these will help reduce the burden on the fragile environmental balance and protect the country's unique natural resources.

Assistance to Madagascar supports U.S. interests by promoting free enterprise, opening new or formerly protected markets for American firms (e.g., tourism, exotic natural materials) and U.S. products (e.g., telecommunications, construction and agriculture); fostering democratic values and institutions; and preserving one of the earth's most extraordinary sources of biodiversity.

The Development Challenge.

Madagascar is a rural, subsistence agricultural society where rice is the heart of the economy, diet and culture. Falling, but still high population growth at 2.8% contributes to the ongoing decline in the standard of living, while severely threatening Madagascar's rich and unique ecology. Indeed, with three-fourths of all households now below the poverty line, poverty itself has become a serious threat to the fledgling democracy. Fifty-one percent of children under five are chronically undernourished. Infant and child mortality is also high at 163 per 1000 live births. Forty-five percent of the population is under 15. These factors produce a high labor-force growth rate and increasingly high unemployment levels. Literacy, once Africa's highest at 80%, has fallen to 46%.

This bleak picture contrasts with the country's rich resource base. The adequate rainfall, reasonably good soils, agro-climatic variation, mineral wealth and good education levels found in Madagascar are inconsistent with the World Bank's 1996 World Development Report which ranks Madagascar as the 12th poorest country out of 133 nations and with abject poverty evident everywhere.

Transformation to a market economy began late in the socialist dictatorship. Between 1986 and 1990, the economy grew by 13%. The transition to democracy followed in 1991. Five free-and-fair elections later, Madagascar has an invigorated civil society and an improved human rights record. However, the institutions and traditions of a democratic market economy, such as an independent judiciary and rule of law, are in their infancy. The successful democratic transition had a high economic cost, further increasing poverty. Beginning in 1994, the Government of Madagascar (GOM) has carried out several difficult reforms, including a 50% devaluation resulting from floating the Malagasy currency. Positive macro-economic management permitted Madagascar to qualified for an IMF Enhanced Structural Adjustment Facility loan in December 1996.

Madagascar's main debt accumulation occurred in the 1980s. External debt was $4.5 billion in 1996, leading to a crushing debt service equal to 46% of export receipts. In the face of a stalled economy, Madagascar suspended and is seeking to reschedule debt service payments. The U.S. Government provided debt relief for Title I food in 1992. Because of its extreme poverty and lack of viable institutions, Madagascar is not an early candidate for graduation from development assistance.

Other Donors

In FY 1996, ranking fourth among donors, the United States provided 8.6% of all assistance to Madagascar, in addition to France (30.3%), International Development Association (23%), Japan (9%), and the European Union (8.6%). Other donors are Switzerland, the United Nations, Italy, and Germany. Traditionally dependent on the French and the multilaterals for donor assistance, the Malagasy have actively sought to broaden the donor base and highly value their relationship with the U.S. Government and USAID.

FY 1998 Program

USAID assistance supports Madagascar's efforts to redress its poverty through accelerated economic growth, while addressing two other long-term challenges: natural resource degradation and high population growth.

To restart economic growth, USAID is working with the GOM to modernize financial and legal systems and institutions. USAID's purpose is to open and expand access to these services to poor people and to micro and small businesses. USAID resources provide business and financial services and help firms identify new markets and business opportunities in agricultural production and processing, leading to higher productivity and incomes in two neglected, but high potential regions. USAID also supports farm-to-market road rehabilitation by small, local contractors and with maintenance by local citizens. USAID works nationally with non-governmental organizations (NGOs), with women's groups, and with human rights groups, and business and civic organizations to strengthen civil society and democratic participation.

To sustain economic growth, establishing a balance between population growth and natural resource use is vital. The primary threat to environmentally sustainable growth in Madagascar is the persistence of traditional, wide-spread agricultural and land management practices, notably slash-and-burn farming, which are inappropriate in the face of increasing population pressure on the land.

High population growth is a major contributor to the country's declining standard of living. USAID supports a rapid expansion of culturally acceptable family-planning and child-survival services throughout Madagascar. Presently, more than six children are born to each family. If families are confident that their new born will live to be adults, they will choose to have fewer children. USAID strategy will reduce the total fertility rate, taking pressure off the country's natural resource base.

To reduce the threat to natural resources, USAID was a founding member and is the biodiversity leader in Madagascar's innovative, 15-year Environmental Action Plan (EAP) -- Africa's first. USAID is partnering with international and local environmental NGOs to conserve biodiversity within Madagascar's national parks and forests, improve park and forest management, encourage environmentally-sound income-producing activities for the rural poor, and strengthen Malagasy natural resource management institutions at national and local levels.

Agency Goal: Encouraging Broad-based Economic Growth

Madagascar's widespread poverty can be alleviated only by rekindling economic growth and creating jobs for the rapidly growing labor force. USAID's strategy combines financial and legal reform and government policy changes to create a positive environment for the private sector.

Since 1994, USAID's financial market reform efforts have achieved a stream of successes. For the National Savings Bank (NSB), they include a major restructuring, independent management and repayment of a long-standing debt of $1.5 million by the GOM. The NSB was profitable in 1995 for the first time in recent history as it provided better services and increased deposit interest rates for customers. The number of depositors grew from 254,770 in September 1993, to 367,907 by October 1996. The Central Bank improved its monetary policy management and annual inflation was reduced from 58% to 15% in two years. USAID also promotes commercial law reform and increased civil society participation in public policy debates. USAID responded to the GOM's request for help in modernizing the legal and judicial framework to encourage private sector growth with a legal reform program that began in 1996. Finally, civic organizations receive USAID assistance to become more effective advocates in the public policy arena.

Resources permitting, USAID plans activities aimed at increasing Madagascar's meaningful integration into the global and regional economy. Activities would support efforts to strengthen Madagascar's effective participation in regional and global trade agreements with the goal of promoting better trade and investment policies and strengthened investors' confidence in the Malagasy economy.

Strategic Objective 3:

Reduce Natural Resources Depletion in Target Areas

Agency Goal: Stabilizing Population Growth and Protecting Human Health

Of the total funding requested in FY 1998 for the population and health strategic objectives, $3,500,000 is planned for population activities, and $2,500,000 is planned for health activities.

Madagascar faces serious health problems that have substantial implications for its economic growth and environmental protection efforts. Madagascar's current population of 13.3 million will double in 25 years if the present annual growth rate of 2.8% is not slowed even more. Recent studies estimate that 40% of Malagasy women currently have a sexually transmitted infection (STI), a frightening statistic (higher than Uganda or Zambia, for example) in a country where AIDS has arrived but not yet gained a strong foothold. One hundred sixty-two of every 1,000 children born in Madagascar die before the age of five and well over half of those children who live are chronically malnourished.

USAID has actively supported Madagascar's rapidly expanding national family planning program since 1993. A 1996 world-wide audit of USAID population programs by the Inspector General's Office found that the USAID program exceeded planned outputs in six of eight performance indicators. Working through the public sector and over 20 NGOs, contraceptive use under this program increased over 10% from mid-1995 to mid-1996. Future efforts will focus on rapid expansion of quality services and strengthening the capacity of local organizations to manage programs and provide services.

Health sector experts familiar with Madagascar recognize it as the only African country where it may be possible to stop the spread of AIDS before the disease takes hold. It is equally clear that Madagascar's exceptionally high prevalence of STIs is a disaster waiting to happen. In 1996, USAID launched a contraceptive marketing program, the centerpiece of its planned activities in AIDS prevention. The condom sales program will initially target the densely populated areas along 650 miles of primary roads. A complementary program of prevention information and activities targeted to high-risk populations will begin during 1997.

USAID is supporting Malagasy efforts to keep their children alive and well. Effective, implementable policies are crucial to success. USAID is working closely with national program leadership in the Ministry of Health and key NGOs to define policies for integrated case management of sick children, refine policies for nutrition, and to disseminate the policies to health program managers. This policy-level focus is complemented by health center programs and community-based activities. USAID will support Madagascar's national immunization program, promote capacity building of local NGOs, andencourage communities and family members to play an active role in disease recognition and prevention.

The Madagascar program has an exceptionally strong data analysis and dissemination component. In 1997 and beyond, program data will be used to set clear targets and measure progress and impact; refine and adapt planned activities, making them more responsive to the end-users' needs; and inform program decision-makers and train program managers to use data for improving program planning and evaluation.

* Strategic Objective No. 2: Smaller, Healthier Families

Agency Goal: Building Democracy

Stability, greater participation, accountability, rule of law and decentralized decision-making are all necessary to attain USAID's goal of broad-based, market-led sustainable economic growth in Madagascar. Under the headings of democracy and improved governance, USAID undertakes activities in accountability and transparency; information, openness and free press; rule of law and legal reform; and expanded public policy dialogue within an effective civil society. These activities are interrelated and will be found throughout the USAID program. Specifically, USAID will strengthen democratic institutions by improving the capacity and the role of civil society in the public policy arena, through assistance to the National Assembly, by supporting legal and judicial reform, and by increasing financial accountability and transparency. One success already is that the National Assembly, acting on advice from USAID-funded National Democratic Institute team, now holds public committee hearings on pending legislation.

Strategic Objective 1: Foster a National Policy, Regulatory and Resource Environment in Which Private Action Can Flourish

Agency Goal: Providing Humanitarian Assistance

USAID's Title II program, locally managed by Catholic Relief Services (CRS), has been fully integrated into Strategic Objective 2, and is an excellent example of programming food aid for development impact. Three innovations are transforming a traditional, humanitarian food aid assistance program into a high-impact development activity. First, scarce food resources, previously distributed to all children age five and under in participating communities, are now given to malnourished children age two and under, the age group at highest risk from mortality associated with malnutrition and other diseases. The CRS program presently provides supplemental food to 59,000 malnourished children, approximately seven per cent of the estimated 900,000 malnourished Malagasy children age five and under. By the end of FY 1998, CRS will phase out of its school feeding and general feeding programs, freeing up resources for an andditional 20,000 malnourished children nationwide. Second, identification of malnutrition and distribution of food is now community-based, rather than center-based as in the past. Third, a community health worker is identified and trained for each participating community. In recognition of this program's enormous potential, USAID has awarded a child survival grant to CRS, providing complementary funding for community-level health promotion activities.

* Strategic Objective No. 2: Smaller, Healthier Families

Agency Goal: Protecting the Environment

Madagascar is currently identified by the international community as the single highest major biodiversity conservation priority in the world. An estimated 80% of Madagascar's species (95% of reptiles and 99% of amphibians) are found nowhere else on earth. The destruction of this treasure trove of biodiversity, the loss of habitat and the extinction of rare plants and animals are of global concern, most critically with regard to new genetic materials needed for advances in medicine andagriculture. Madagascar's natural resource base is seriously threatened by human poverty, high population growth rate, and unsuitable government policies. Slash-and-burn agriculture has destroyed over 80% of the tropical forest cover and is converting needed soil nutrients into greenhouse gases which, in turn, impact negatively on global climate change. Soil erosion is among the worst in the world; topsoil losses are estimated at 80 tons per acre annually in some areas of the country.

To preserve this unique and valuable biodiversity heritage, USAID partners show local people alternative income-producing activities which are intended to reduce pressures on the rain forests. Rural people are taught how to manage their natural resources in non-destructive and sustainable ways. USAID-funded efforts build the capacity of local communities and help implement policy modifications which empower local populations. For example, local community groups now receive 50% of park-entry receipts and a share of forest-cutting fees. USAID support has created Madagascar's landmark environmental impact assessment law and has established a private environmental foundation, the country's first, to finance local initiatives for environmental protection activities.

USAID supports the Malagasy Environmental Action Plan through innovative activities which maintain biodiversity and strengthen national and local institutions responsible for natural resource management. USAID support has expanded the amount of land under protection and developed Madagascar's first National Parks System. After studying the pressures on these parks, USAID partners, including Peace Corps, PACT, Conservation International, World Wildlife Fund, CARE, Wildlife Conservation Society, and universities such as Cornell and State University of New York/Stonybrook, show local populations alternative ways to use available resources to decrease destructive practices and inculcate community responsibility for sustainable resource use. Activities with the Malagasy Forest Service updated and indexed timber prices to reflect the real value of the wood and automatically adjust for inflation. The result is a 12-fold increase in revenues to the National Forestry Fund during the past three years. Forest management plans are being developed which involve local beneficiaries in both the planning process as well as the day-to-day management of the forests, and the Forest Service has adopted a new policy of preparing environment impact studies for all forest management plans. Revenue-sharing with local populations in and around protected areas increased 44% since 1993, while tourist visits to parks and reserves increased by 108%.

Protecting Madagascar's biodiversity cannot be accomplished without also addressing issues of land use and agricultural production. Agricultural productivity is limited by the lack of technology and inputs, while marketing is constrained by inadequate transportation infrastructure. USAID will promote use of agricultural land and production technologies that do not result in forest destruction. USAID commercial agricultural promotion efforts are showing results. More Malagasy agribusinesses are purchasing U.S. agricultural and manufacturing equipment. USAID rice research shows that new seed varieties can double yields without fertilizer and achieve 300-400% increases with fertilizer. USAID assistance led to increased sales of non-traditional exports, especially organically grown produce and vanilla to South Africa, Europe and the United States in the past two years.

Inadequate transportation infrastructure is another major rural constraint to development. By increasing market access of high potential zones, USAID will quickly help raise small farmer incomes and boost rural sales and employment. USAID will have rehabilitated 216 miles of rural, farm-to-market (unpaved) roads by the end of 1997, giving rural families the opportunity to shift away from destructive traditional agricultural practices. Post rehabilitation monitoring has seen cases of truck traffic seeing 10-fold increases while transportation prices have dropped by one-third and small farmers are receiving market prices for their output, effectively almost doubling their incomes.

The Environmental Action Plan second phase starts in 1997 and USAID will again be a major financial and technical contributor. USAID support will further shift management responsibility to Malagasy institutions, expand local participation, increase ecotourism and private sector involvement, and encourage Madagascar's strong commitment to effective management of the country's expanded national forests and parks system.

Strategic Objective 3:

Reduce Natural Resources Depletion in Target Areas

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USAID/MADAGASCAR

FY 1998 PROGRAM SUMMARY

	Encouraging Broad-based Economic Growth	Stabilizing World Population Growth and Protecting Human Health	Protecting the Environment	Building Democracy	Providing Humanitarian Assistance	Totals
USAID Strategic Objectives
1. Foster a National Policy, Regulatory and Resource Environment in which Private Action Can Flourish Dev. Fund for Africa	---	---	---	2,000,000	---	2,000,000
2. Smaller, Healthier Families Dev. Fund for Africa P.L. 480 Title II	--- ---	6,000,000 ---	--- ---	--- ---	--- 3,086,000	6,000,000 4,800,000
3. Reduce Natural Resource Depletion in Target Areas Dev. Fund for Africa	1,500,000	---	7,000,000	---	---	8,500,000
Total Dev. Fund for Africa P.L. 480 Title II	1,500,000 ---	6,000,000 ---	7,000,000 ---	2,000,000 ---	--- 3,086,000	16,500,000 3,086,000

USAID Mission Director: Donald R. Mackenzie

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ACTIVITY DATA SHEET

PROGRAM: MADAGASCAR

TITLE AND NUMBER: Foster a National Policy, Regulatory and Resource Environment in which Private Action can Flourish, 687-SO01

STATUS: Continuing

PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $2,000,000 DFA

INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To strengthen the rule of law, the financial sector and civil society in this new democracy and to assist the government to design implementable public policies that emphasize poverty alleviation in a participatory and open fashion.

Background: The standard of living in Madagascar is lower than it was twenty years ago as a result of a prolonged period under a socialist dictatorship. A democratically-elected government has been in place since 1993, but much of the policy and regulatory structure of the socialist era has yet to be replaced by a modern framework which supports and encourages private initiative.

USAID Role and Achievements to Date: USAID has concentrated on the financial sector where we support a revitalized, financially strong National Savings Bank and a strengthened and independent Central Bank. The National Savings Bank mobilizes private savings and investment and is the only financial institution serving low-income households throughout the country. The number of depositors has increased by 113,137 since U.S. assistance began in 1993 and deposits are three times higher. Despite high budget deficits, the Central Bank has used prudent monetary policies to reduce annual inflation from 37% at the end of 1995 to 15% at the end of 1996 and to meet monthly monetary growth targets agreed to with the International Monetary Fund.

Description: USAID focuses on three activity areas: commercial law reform; financial sector modernization; and broader participation by citizens in the public policy arena. FY 1998 funds will support commercial law reform activities. This activity responds to the desire of the business community to have access to a judicial system that will provide swift and fair treatment. In FY 1997, USAID efforts published legal texts which were unavailable to judges and lawyers, trained Malagasy judges and lawyers in commercial law, and provided expert assistance in legal reform and court administration. These activities will continue in FY 1998 and 1999. USAID will promote simple and inexpensive systems, such as arbitration and mediation, to resolve commercial disputes. The variety and quality of financial services offered to low-income households has expanded under the Financial Market Development activities (687-0120 and 687-0121). Direct assistance to collaborating financial institutions ends in 1997. Work on the legal framework for the financial sector will continue. Under the Participation and Poverty activity (687-0125), USAID is improving the ability of civil society groups to represent the interests of their members in public policy arenas and to become more active advocates of those interests. USAID assists groups previously excluded from public policy debates. Support is also provided to government specialists to improve the quality of policy analysis.

Host Country and Other Donors: As a condition for USAID assistance in commercial law reform, the Government of Madagascar (GOM) created a Legal Reform Commission, chaired by an advisor to the Prime Minister. This Commission guides the reform process. USAID is the largest donor in legal reform. The World Bank is providing $4 million in assistance to enable the GOM to establish a national judges training institution and to purchase legal books. The French Government provides $200,000 to train court clerks. USAID, World Bank and the Swiss Government jointly support financial sector development in the amount of $10 million, $6.3 million and $600,000 respectively.

Beneficiaries: All Malagasy households and businesses will benefit from an improved policy environment and an improved judicial system, except those who are able to take advantage of currentweaknesses in public administration and the legal system for personal gain. Civil society groups around the country will benefit from increased capacity and increased advocacy.

Principal Contractors, Grantees, or Agencies: USAID implements current activities through a U.S. University, Cornell, and a U.S. PVO - PACT. Future activities will be implemented through U.S. and Malagasy firms, and local non-government organizations.

Major Results Indicators:

Baseline Target

Deposits at National Savings Bank $3.25 million (1992) $9.50 million (1997)

Number of depositors 254,770 (1992) 428,000 (1997)

Backlog of commercial court cases 1,053 (1994) 500 (1997) 0 (2000)

Increased number of civil society 0 (1996) 20 (1999)

groups as active advocates in

public policy arena

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ACTIVITY DATA SHEET

PROGRAM: Madagascar

TITLE AND NUMBER: Smaller, Healthier Families, 687-SO02

STATUS: Continuing

PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998, $6,000,000 DFA; $3,086,000 P.L. 480, Title II

INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002

Purpose: To reduce the total fertility rate from 6.6 in 1991 to 5.6 in 1999; improve the health of children under five; and prevent the spread of AIDS.

Background: Madagascar's population is growing at a rate of 2.8% per year. Less than 10% of Malagasy women use contraceptives and over 50% of children under five are chronically malnourished. The prevalence of Sexually Transmitted Infections (STIs) is exceptionally high -- it is estimated that 40% of women have an active STI.

USAID Role and Achievements to Date: USAID supports efforts to increase the number of health centers offering quality family planning and child survival services. As a result, the use of modern contraceptive methods has increased from 5% in 1992 to an estimated 11% in 1996. USAID recently launched a condom sales program targeted to groups at risk of Acquired Immunodeficiency Syndrome (AIDS) infection. USAID initiated its first child survival program in 1996, and activities to improve national policies, health services and community-level programs are underway.

Description: USAID focuses on five activities: (a) increasing the use of modern contraceptives; (b) improving child survival policies and the health of children age five and under; (c) preventing AIDS and STIs through activities targeted to high-risk populations; (d) increasing the dissemination of quality program data and the use of these data by program managers in day-to-day implementation; and (e) integrating the P.L. 480 food aid program with the child survival program to improve development impact.

Host Country and Other Donors: The GOM places a high priority on child survival and family planning, and, under the national health policy developed in 1996, is supporting key reforms in decentralization of the health system, initiation of cost recovery, and improvements in drug management. USAID provides approximately 70% of donor funds for the national family planning program; United Nations Population Fund (UNFPA) covers 20%; and Germany (through GTZ) 10%, in a highly collaborative effort. For child health, the World Bank, France and the European Union provide funds for health system development and national drug policy (approx. 50% of overall donor support for health). The UN agencies including UNICEF, World Health Organization and the United Nations Joint Program on AIDS provide approx. 30% of donor support and USAID contributes strong technical leadership and approximately 20% of all funding related to child health, focusing on key interventions to produce maximum impact. Over the coming three years, USAID and the World Bank will provide approximately 80% of total funding for AIDS prevention, with Germany, the European Union and UNICEF providing the remaining 20%.

Beneficiaries: Women of child-bearing age and children under five years represent 42% of Madagascar's estimated 1996 population of 13.3 million. USAID programs will reach approximately 2.5 million women and children by 1999.

Principal Contractors, Grantees or Agencies: USAID implements activities through a U.S. non-profit institution, Management Sciences for Health (MSH), Peace Corps, CARE, Catholic Relief Services, the GOM, 25 local NGOs, and UNICEF.

Major Results Indicators:

Baseline Target

Contraceptive prevalence rate (%)

3% (1991)

14% (1997)

Couple years protection

72,000 (1992)

240,000 (1997)

Immunization Coverage

43% (1992)

65% (1998)

Child health policies in place

0 (1996)

4 (1998)

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ACTIVITY DATA SHEET

PROGRAM: MADAGASCAR

TITLE AND NUMBER: Reduce National Resources Depletion in Target Areas, 687-SOO3

STATUS: Continuing

PROPOSED OBLIGATION AND FUNDING SOURCES: FY 1998: $8,500,000 DFA

INITIAL OBLIGATION: FY 1997; ESTIMATED COMPLETION DATE: FY 2002

Purpose: To reduce natural resources depletion in target areas by conserving biodiversity in national forests and parks; improving management of forest resources; increasing income opportunities for resources users; and increasing natural resource institutional capacity.

Background: Madagascar's natural resource base is seriously threatened. The scale and intensity of deforestation, loss of biological diversity, soil erosion and associated declines in overall land productivity are unparalleled. The economic cost of decreased agricultural productivity due to soil loss and fertility decline, loss of productive forests, damage to infrastructure because of soil erosion, and the costs of infrastructure maintenance and redesign is estimated to equal between 5% and 15% of Madagascar's Gross Domestic Product (GDP) annually. Awareness of these problems led the Government of Madagascar (GOM) and the donor community to develop a 15-year national Environmental Action Plan (EAP) in 1990 as a framework for investment to protect natural resources and at the same time foster ecologically and economically sustainable development.

USAID Role and Achievements to Date: USAID has been a lead donor to the EAP since 1990, providing support in the areas of biodiversity conservation, forest management planning, policy development, and institutional strengthening. Key results include the establishment of a Malagasy institution to coordinate both the management and implementation of national parks and reserves (National Association for the Management of Protected Areas) and regional development plans to diminish pressure on the natural resource base. USAID supports the National Office of the Environment in policy formulation and implementation coordination. In 1995, the National Assembly approved a new law requiring environmental review for all investments in Madagascar, and the GOM established a private environmental endowment fund to finance local-level environmental management efforts. In 1996, the National Forest Service adopted a policy of preparing environment impact studies for all forest management plans. Four forest management plans are being developed which will serve as models for local participation in both the planning process as well as to encourage local participation in the general management of the forest. Revised stumpage fees for commercial timber species and other forest products have produced a 12-fold increase in forest revenue collection in the past three years which funds the activities of the National Forest Service. Households in conservation priority areas are adopting alternatives to destructive practices, and 39 community associations/non-governmental organizations (NGOs) are recipients of grants which promote sustainable natural resource management and capacity building of village groups. Further, 13 village development committees in 1996 received a share of park entrance fees for community-managed projects, thereby establishing a conservation/development link.

Description: The second five-year phase of the EAP (1997 - 2001) focuses on the transfer of natural resource management responsibility from centralized to local and regional Malagasy institutions. USAID will focus on results in two broad areas: (1) improve natural resource management and protect biodiversity by addressing key pressures on the natural resource base; and (2) establish a national level enabling environment (policies, institutions and financial mechanisms) necessary for EAP success.

Within this focus, progress in two areas will be achieved. First, national resource management will improve in protected areas and in broader landscapes of Madagascar. The program will work closely with Government, the private sector, NGOs, local communities and other donors: in and around protected areas (national parks) and national forests, in broader (regional) landscapes. The program will demonstrate innovative approaches for managing forest and agricultural areas with an emphasison local community participation, and more efficient and sustainable use of natural resources, and strengthen the development and application of selected agro-ecological policies and technologies which support conservation and agricultural objectives. Second, the development and application of sound environmental policies and procedures; the establishment of basic administrative and financial capacity of key GOM and private environmental institutions; the creation and use of sustainable financing mechanisms for designated institutions; and the establishment and use of low-cost information management and program monitoring/evaluation systems.

Activities in support of the program outcomes described above focus on six different areas: (1) development and application of environmental policies, legislation and procedures; (2) national parks and forests management and ecotourism development; (3) promotion of multiple-use forest ecosystems and sustainable soils and water management; (4) participatory community management of renewable natural resources; (5) environmental information management system; and (6) sustainable financing mechanisms.

Host Country and Other Donors: The Government of Madagascar strongly supports the EAP, providing 20% of the total program costs through contributions to operating costs and tax reductions. The EAP provides an overall framework for the intervention of international donors in the environmental sector with the goal to maximize the use of available resources and to avoid the duplication of efforts. The World Bank has provided institutional support to key EAP institutions and funding for micro projects to address the problems of soil and water conservation. The Swiss government has been instrumental in the development of a new forest policy and, along with the German government, will promote its implementation within the Malagasy Forest Service. The United Nations Development Program has been active in biodiversity priority settings and support through funds from the Global Environment Facility. The French government provides primary support to establishing an effective environmental information management system. USAID will provide $22 million to directly support the $150 million EAP program and another $18 million to support rural development and financial sustainability activities which indirectly support the EAP. The USG is considered as the second largest donor in the environmental sector after the World Bank.

Beneficiaries: The primary beneficiaries of the environmental program are the subsistence farmers and natural resource consumers who live in the villages in and around the national forests, national parks and protected areas.

Principal Contractors, Grantees, or Agencies: USAID implements activities through U.S. firms, the Peace Corps, the United States Geological Survey, U.S. and local NGOs, and U.S. universities. Current grantees and contractors include World Wildlife Fund, Conservation International, PACT, CARE International, VITA, Cornell University, State University of New York/Stonybrook, Chemonics, Associates in Rural Development (ARD), and Tropical Research & Development (TR&D).

Major Results Indicators: Baseline Target

Natural habitats contained in Malagasy 1,045,865 (1989) 1,500,000 (2001)

national parks (no. of hectares)

Number of national parks managed 0 (1992) 18 (2001)

effectively

Number of qualified forest-management 0/0 (1992) 8/4 (2001)

plans developed/implemented

Percent of village households in priority 0% (1992) 50% (2001)

zones that have adopted program-

sponsored alternatives to destructive

practices

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