Lilongwe: Malawi’s development agenda for 2012-2016 is set out in the Malawi Growth and Development Strategy II (MGDS II). Under its predecessor, the MGDS I, Malawi achieved economic growth, poverty reduction, national food security and a 50 per cent reduction in the prevalence of HIV. The objective of MGDS II is to reduce poverty and achieve the Millennium Development Goals (MDGs). Yet in 2010 Malawi imported US$2.3 billion worth of goods and services (43 per cent of GDP), but only exported US$1.2 billion1 (22 per cent of GDP). This reflects a major unsustainable structural trade deficit and if maintained, will undermine the goals of MGDS II.
The strategic imperative and goal for Malawi should now be to build productive capacity such that exports may match imports in the long-term. This is essential to allow the MGDS II to build on the gains made under MGDS I. This document supports the MGDS II by presenting Malawi’s strategy to develop its ability to export.
Benchmarking Malawi’s capacity to export against its import bill is essential because, as experienced with the foreign exchange and aid crisis in 2011, Malawi’s structural trade deficit may lead to a reduction in Malawi’s ability to export and undermine the emergence of the productive base of the economy. Often the instinctive reaction in times of crisis is to protect welfare without supporting the productive economy. Imports and exports cannot be detached from each other, just as the realities of poverty reduction, development and export competitiveness are inextricably linked. Therefore a strategy to develop Malawi’s capacity to export needs to account for the wide range of factors that determine the willingness and ability of exporters, potential exporters and suppliers to exporters to collectively export on the scale required by Malawi’s import and consumption bill.
The current extent of the structural trade deficit means that Malawi’s National Export Strategy (NES) is not just about exports in the most direct form. Crucially, it is also about how Malawi can build the productive base of its economy and therefore is a critical complement to the Economic Recovery Plan of 2012. For exports to grow to a level that balances imports and consumption, it is critical that this base be developed. Therefore the development of Malawi’s productive base is central to Malawi’s development agenda as set out in the MGDS II. The component of the MGDS II that the National Export Strategy provides is a road map for how Malawi can build its productive base in a manner that will drive export growth on a sufficient scale to maintain the level of imports.
The NES is also central to accomplishing Malawi’s desired move into the export of high value goods and services and to reducing Malawi’s reliance on the export of raw or semi-raw commodities. These have left Malawi’s poor and vulnerable exposed to commodity price fluctuations, crop failures, aid shocks and climate change. The development of the productive base is also fundamental for the economic empowerment of youths, women, smallholder farmers, job seekers and the poor. Malawi’s demographics, characterised by a youth bulge, also require the development of a healthy and expanded productive base, capable of absorbing youths to drive rather than hinder Malawi’s development agenda.
- Malawi, therefore, urgently needs to develop its productive base to:
a) Drive Malawi’s export capacity on a scale that exports can maintain the pace of imports.
b) Economically empower youths, women, small-holder farmers, job seekers, micro and small businesses and the poor through ensuring that they are included in the productive base. By setting out a way forward that addresses this dual concern, the NES serves as a critical component of the MGDS II.
- The Components of the Strategy
The strategy to build Malawi’s productive base and export capacity in a manner that empowers the poor, farmers, youth, women and other vulnerable groups, is based on four areas of focus:
1. Priority Area 1 – Export Clusters: this Priority Area is divided into two parts:
a. Three prioritised export-oriented clusters for diversification:
Through coordination and a concerted effort, develop priority clusters that have the potential to complement tobacco and drive exports through value addition, mostly to neighbouring and regional markets, in a manner that exports can maintain the upward pressure of imports. These clusters are:
i. Oil Seed Products – cooking oil, soaps, lubricants, paints, varnishes, meals and flours, bio-fuel, animal feed, fertilizer, snacks and confectionery derived from sunflower, groundnuts, soya and cotton
ii. Sugar Cane Products – sugar, high value sugar through branding, sugar confectionery (such as syrups, sweets, caramel etc), sweetener, ethanol, spirits, cane juice, fertilizer, animal feed, electricity, cosmetics
iii. Manufactures – beverages, agro-processing (including dairy and maize, wheat, horticulture and pulse value addition), plastics and packaging, assembly.
a. Supporting exports of existing clusters: The NES includes support plans to stakeholder efforts in other major existing clusters: tobacco, mining, tourism, tea and services.
Priority Area 2: Conducive Environment – Develop an environment conducive to economic competitiveness and economic empowerment of youth, women, farmers and MSMEs.
Priority Area 3: Supportive Economic Institutions to Build the Productive Base of the Economy – Invest in supportive economic institutions and organisations. Improve communication through ongoing dialogue and devote high-level attention to develop agencies that are central to the development of Malawi’s productive base and export competitiveness.
Priority Area 4: Competencies, Skills and Knowledge – Invest significantly in competencies, skills and knowledge because these are the foundation of Malawi’s productive base and its export capacity, while also being critical if the development goals of the MGDS II are to be achieved.
The four Priority Areas will be composed of a number of components. These components have been prioritised based on the need of the economy. These components will be implemented through the NES’ implementation mechanism, which is the Trade, Industry and Private Sector Development Sector Wide Approach. This SWAp will contain seven Technical Working Groups whose mandate will be to ensure the implementation of the various components.
The documents listed below, can be downloaded here.
Malawi NES Main Document (2125kb)
Annex 1 - An Implementation Plan for the NES and the Sector Wide Approach (883kb)
Annex 2 - A Strategy to Develop the Oil Seed Products Cluster (728kb)
Annex 3 - A Strategy to Develop the Sugar Cane Products Cluster (768kb)
Annex 4 - A Strategy to Develop the Manufactures Cluster (730kb)
Annex 5 - Matrixes of Prioritised Actions to Secure Conducive Environment for Productive Base and Export (624kb)
Annex 6 - Matrix of Prioritised Actions to Develop Malawi’s Productive Base Support Institutions (325kb)
Annex 7 - Matrixes of Prioritised Actions to Develop the Competencies, Skills & Knowledge Base Required to allow Malawi’s Export Capacity to Emerge (404kb)
Annex 8 - Support Plans for Tobacco, Tourism, Tea, Services and Mining (476kb)
Annex 9 - An Explanation of the Cluster Prioritisation Method and its Outcomes (464kb)
Annex 10 - The Review of Cross-Cutting Export Enablers (728kb)
Annex 11 - The Review of Institutional Capacity from the perspective of building Malawi’s Productive Base and its Export Capacity (442kb)