Download Malawi - CUTS Geneva

Fostering Equity and Accountability in the Trading System
(FEATS)
Angela Mulenga, Centre Coordinator,
CUTS Africa Resource Centre, Lusaka
6 April 2009
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Economic background
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Explanation of Malawi trade policy
◦ Trade policy process
◦ Key government institutions
◦ Consultative mechanisms
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Stakeholder views
◦ MOIT, other government institutions, private sector, CSOs
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Inclusive Trade Policy Making (ITPM) index
◦ Landlocked, sparsely populated, 2006, 82% of total population
lived in rural areas
◦ GDP per capita increased slightly in nominal terms since 1995
◦ Real GDP growth rate stood at -0.4% during the same period.
◦ Recent years have seen more robust real GDP growth rates,
estimated at 7.9% (2006), 6.8% (2007) and 5.1% (2008).
◦ 54% of the population under the national poverty line in 2004
◦ In 2004-2005, 73.9% of population living below $1.25 US dollars
per day and 94% below $2.00 US dollars per day
◦ Agriculture provides bulk of the employment opportunities,
although its prominence is decreasing
 In 2003, 73.6% of those employed in Malawi were employed in informal
sector
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Nearly even balance of payments in 1999
◦ Substantial deficit has developed
 In 2007 imports were valued at 41% of GDP, almost double exports,
valued at 23% of total GDP
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Recent Developments
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Trade Shares in regional agreements
◦ Improved macroeconomic stability: positive impact on current
account deficit which has stabilized since 2007
◦ Progress in diversifying exports away from the traditional
products (rice, coffee, pulses)
◦ Still struggling to compete in international markets in apparel
◦ Imports : industrial inputs (petroleum, fertilizer, consumer goods
and transportation equipment) and significant amount of food
◦ 2007, 21.1% and 35.7% of total exports to COMESA and SADC
member countries respectively
◦ 2007, 10.2% and 53.9% of total imports from COMESA and SADC
member countries respectively
• Malawi`s major trading partners are its neighbours:
South Africa, Tanzania, Zambia and Zimbabwe.
• Indicates the importance of a trade policy that maximizes
potential for regional trade.
Import
Source
South Africa
India
Zambia
Tanzania
United
States
% Share in
Total Imports
34.9
8.2
7.8
5.9
5.9
Export destination
% Share in
South Africa
Germany
Egypt
Zimbabwe
United States
Total Exports
12.4
12
9.4
8.3
7.5
• Policy prioritizes multilateral integration and
participation in trade systems
• Malawi has not signed an EPA with the EU
• Benefits from AGOA, EBA, Cotonou, WTO, Special
access as per WTO Hong Kong Ministerial Declaration,
GSPs, SADC FTA, COMESA FTA and bilateral
agreements
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After independence, policy is based on Policy Framework
Papers, no official trade policy
◦ Government ownership, influence and control characterized the economy.
◦ Centered on import substitution and other interventionist measures
◦ Efforts to reconcile balance of payment deficits and inflation
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1980, Malawi implemented Structural Adjustment Policies
(SAPs)
1990s onward, liberal reforms, including trade liberalization
World Bank TTRI data shows increasing openness of Malawi
trade regime
◦ TTRI rating for MFN applied tariffs decreased over 2005-2007 to 2008
from 25.4 to 20.5
◦ Overall TTRI rating declined over 2005-2007 to 2008 from 22.4 to 13.4
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Malawi participation in IF processes
◦ IF participation began in 2001, has helped to include trade policy into
overall development strategies of the country
◦ DTIS was approved in 2004 and findings have been incorporated into
National Growth Strategy of 2003, PRSP, and MGDS
◦ Zambia currently preparing a 5 yr. Implementaion plan for the EIF
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Government’s vision is “transforming Malawi from a
predominantly importing and consuming country to a
predominantly producing and exporting country”
Works to:
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diversify exports
enable a more stable, conducive environment for trade
open Malawi to exports, imports and foreign direct investment
improve standards of living
create employment
strengthen balance of payments
• Although Malawi strives to maintain an open economy,
barriers to exports and imports still exist and affect trade
(tariffs, international standards applied, privatization is
occurring although state owned firms still exist) Antidumping, countervailing and safeguard measures are being
established, environmental, health, safety and security
standards
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“Demand-driven” process
Policies set up by means of legislation, Hierarchy: Constitution, followed by Acts
of Parliament and "subsidiary instruments" (e.g. government regulations, orders,
and guidelines)
Presidential Directives
Changes emanate from the Ministry of Industry, Trade and Private Sector
Development
inter-agency meetings , NWGTP
The recommendations from inter-agency meetings are submitted to the Minister
of Industry and Trade through the Director of Trade and Principal Secretary
Cabinet Papers are then created
Cabinet Approves: incorporates into policy or pushes into the law making process
Attorney-General's Office drafts the related bill with input from relevant minister
Adopted by the Cabinet
Bill is published in the Government Gazette, generally for at least 21 days.
Introduced in the Parliament
If passed, with Presidential assent becomes law
TRADE POLICY MAKING
PROCESS IN MALAWI
INTER-AGENCY MEETINGS
make recommendations
-Ministry of Trade and Industry
-Stakeholders
QUARTERLY MEETINGS
make recommendations
-chaired by private sector
-co-chaired by Ministry of Trade
and Industry
-civil society
-academia
-media
-government sectoral ministries
-cooperating partners
-trade unions
MINISTRY OF INDUSTRY AND TRADE
reviews
CABINET PAPERS
Processed and drafted from
recommendations.
CABINET APPROVES
-President
-Sectoral Ministers
-Vice President
LAWS
Drafted by Ministry of Industry and
Trade and Ministry of Justice and
Constitutional Affairs
NATIONAL ASSEMBLY
votes
PRESIDENT
signs
MINISTRY OF INDUSTRY AND TRADE
implements and reviews policies and
laws.
POLICIES
Approved and Instituted
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Ministry of Industry and Trade : manages and implements trade policy with support
from technical institutions
◦ activities include: trade development, research, policy, advocacy and finance,
negotiations of multilateral, bilateral and regional trade agreements, development of
a conducive trading environment, and increasing participation of Malawians in
trading activities.
Other Government Bodies:
◦ Consulted during trade policy diagnostic planning and implementation
◦ Invited to stakeholder consultation meetings
◦ Can initiate comments and viewpoints
◦ Key Actors: Reserve Bank, the Ministries of Finance and Economic Planning, and
Trade, National Economic Council, Ministry of Agriculture and Food Security, Malawi
Revenue Authority, Reserve Bank of Malawi, Malawi Bureau of Standards, Malawi
Investment Promotion Agency, and Malawi Export Promotion Council (MEPC).
Inter-Ministerial Conferences:
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ministries provide input
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comment on relevant issues related to trade policy
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discussions on specific issues can be initiated as well
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Civil Society Organisations (CSOs) :
Started operating in Malawi from 1994
Economic and social issues took off around 2000.
Vibrant CSO scene with many active organizations, although not too
many are working on trade issues
MEJN and CISANET have projects in rural areas, yet rural reach of
CSOs must be strengthened given that most are based in urban
areas
No formal representatives of informal sector in CSOs, yet CSO
efforts to improve trade policy impact various disadvantaged groups
in the policy process, including the informal sector
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Private Sector:
a number of private sector and business umbrella organizations
Umbrella Organizations and sector-specific private sector
organizations participate in the trade policy making process
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individuals employed in the informal sector are not formally
represented by private business sector umbrella organizations, yet
are indirectly included through efforts of these organizations to
advance the interests of the sector as a whole
Both are most active in NWGTP and NAG
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NWGTP - National Working Group on Trade Policy
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NAG - The National Action Group
◦ advises the Government on all legislative and policy issues relating to trade
◦ monitors implementation of trade arrangements and ensures conformity with rules.
◦ consultation and cooperation among private sector, public sector , academia, civil
society and donors
◦ chaired by a private-sector representative and co-chaired by MOIT
◦ privately funded
◦ works to deepen engagement between private and public sectors
◦ Includes: key economic ministers, key public sector institutions, CEOs of leading
investors and private sector representatives, heads of development partners and CSO
partners
◦ sectoral working groups
◦ initiates ad hoc groups and dialogues
◦ works with government and donor processes to better integrate private sector groups
with International Organizations
◦ capacity-building activities
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MNDTFP – Malawi National Development and Trade Policy
Forum
◦ coordinates with the Malawian negotiators for the EPA with the EU.
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NEC – National Economic Council
◦ Publicly funded
◦ Reports to the President
◦ Operationally linked with the Ministry of Finance and Economic
Planning
◦ Advises the government and public on economic and development
policies
◦ Aids in establishing national development goals and plans
◦ Monitors implementation
◦ Participatory approval
◦ Process: Technical Working Groups, comprising Council staff and
technical officers from line ministries, provide an interface
between stakeholders to formulate and review policies
President
Policy Direction
National
Economic
Council (linked
with MoFEP and
Other Ministries)
Cabinet
Policy
Formulation
NWGTP
IMC
MOIT
NAG
MWGTPF
Policy
Implementati
on
MoA
MEPC
MIPA
Other Line
Ministries
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MOIT endeavors to consult as broadly as possible and uses the IMCs and the
NWGTP for this purpose
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According to some CSOs, lack of people participation in previous policies has
resulted in policy failures
◦ alliance of technocrats and donors determined national policies and invited CSOs for
endorsement
◦ Recently, some interest in removing these tendencies
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External influences align the government away from CSOs and more toward
multilateral institutions
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Challenges:
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Two key suggestions:
◦ Quickly evolving international trade scene requires timely and adequate adjustments
in the trade policy
◦ Changes in government often lead to changes in policies mid way through
implementation
◦ Limited human, technical and financial capacity to deal with a vast number of issues
and actors.
◦ Strengthen consultative fora (NWGTP and PPD) to ensure interests of stakeholders
considered
◦ Institutional capacities of stakeholders should be enhanced
Example - Ministry of Agriculture
 Challenges:
◦ Pressure on limited technical, time and monetary resources
◦ Little opportunity to build up a relationship of trust and a lack of sense of
ownership exists (consultants used)
◦ Donor driven technical assistances tends to concentrate on donor
priorities
◦ Inadequate coordination between government institutions
◦ Lack of timely feedback on comments by the MOIT and COMESA/SADC
secretariats.
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Suggestions:
◦ Ministry of Economic Planning and Development (MoEPD) should take the
lead role
◦ Technical assistance should be designed to transfer skills and knowledge
and not to under-capacitate
◦ Strengthen government coordination via an independent coordinating
government institution
◦ Build capacity: increase human resources, utilize available human
resources and adequate financial resources
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The private sector has been more active on
policies related to international agreements
and less on regional and domestic trade
issues
◦ Suggestions:
 Addressing their own capacity constraints
 Providing less tight timelines
 Improving opportunities for participation for less
powerful private sector organizations, for example,
Malawi Union for the Informal Sector, Indigenous
Business Association, etc.
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Good progress in terms of CSOs and government
partnership
Government observes that some CSOs do not attend
consultations despite being invited
Challenges:
◦ Generally more interest in multilateral trade issues
◦ Lack of adequate information on trade issues (especially
domestic)
◦ Lack of analytical skills and competencies (technical nature
of trade policy)
◦ Lack of resources for sustained engagement on trade policy
issues
◦ Ideological differences between the private sector and CSOs
◦ Interests of citizens that are more focused on micro level
rather than larger issues
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Recommendations:
◦ Collection and use of evidence by CSOs for meaningful
participation
◦ Undertaking and presenting analysis of trade policy from
poverty reduction perspectives
◦ More CSO space in actual policy formulation
◦ Enacting legislation for CSO access to trade information
◦ Dissemination of trade policy information to citizens
◦ Strengthening CSO networking on trade
◦ Prioritize citizen participation and action on trade
policies
◦ Strengthening of trade weather stations and other
community based networks
◦ Develop capacity of MOIT for more and better
consultations with all stakeholders.
 The NWGTP is only for discussions and is not a decisionmaking forum
 Several stakeholders are not currently represented in the
process
 The present process is producer-oriented and there is need
for balancing producer and consumer interests
 The role of parliament and parliamentarians should be
strengthened
 Relevant government agencies can improve the
dissemination of information by simplifying the presentation
and improving access
 participation of CSOs and other relevant government
ministries in the trade policy making process should be
strengthened to include not only participation in discussions,
but also in decision-making processes
 No one-size-fits-all policy
 Economists generally agree that open trade policy is
good for development
 features of good policy include:
 Coherence with national development policy
 Supportive of and be supported by other government
policies
 Balance the interests of all key stakeholders
 Conform with the commitments of the country under the
WTO and other regional and bilateral agreements
 Accompanied by an appropriate implementation plan
 Determines whether the key features of good policy are
attained which in turn determines the contents of policy.
 May not result in best policy
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but context and country specific
But widest possible buy-in and support from all key
stakeholders
 Support and ownership ensure policy’s relevance and
proper implementation.
 Outlining the key elements of the process also leads to the
identification of the relevant stakeholders.
 Important assumption: key stakeholders are an active part
of the process with opportunities for equal participation
and proportionate influence.
Features of a Good Trade Policy
Key Elements of Good Trade Policy Making
Process
Relevant Stakeholders
Based on national development policy
Clear guidance/directions from national
development policy makers
National development policy makers (e.g.,
Ministry for Planning and Development,
President’s Office, parliament, etc)
Linked with other governmental policies
Inputs and feedback from other government
ministries/departments
Other relevant government
ministries/departments (e.g., those dealing with
agriculture, employment and labour, finance,
competition and consumer protection, education
and health, etc.)
Linked with international commitments (to
implement the commitments as well as to guide
the positions regarding future possible
commitments)
Inputs and feedback from relevant ministries
and negotiators
Relevant ministries (e.g., Ministry of Foreign
Affairs, etc.) and negotiators (e.g., dealing with
the WTO agreements and negotiations)
Balancing the interests of all key stakeholders
Inputs and feedback from key non-state
stakeholders
Key non-state actors (e.g., representatives of the
private sector, farmers, consumers, and the civil
society)
Clear implementation plan with adequate
resources
Commitment of required resources
Relevant government ministries (e.g., Ministry
of Finance) and donors (multilateral and
bilateral)
• all the key stakeholders have been identified
• they have equal opportunity to participate in the process
• none of them is allowed to disproportionately influence the
process nor the outcome in favor of its own interests.
– Seven action variables, applied in two different groups
– Variables 1-4 require action of primary government ministry in
trade policy
– Variables 5-7 require action of all other stakeholders
– Three distinct indices are calculated for other relevant government
agencies, private sector, and CSO categories of stakeholders
respectively
– maximum value of 1 (when the appropriate action has been
taken by the concerned actor)
– intermediate value of .5 (when some action has been taken
by the actor concerned but such is not sufficient).
– minimum value of zero (when the action has not been taken
at all by the concerned actor)
– Overall ITPM rating out of 13, index includes 4 distinct
parts
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Increase awareness of political economy aspects of trade
policy making in Malawi
Assess the inclusiveness of the trade policy making process
in terms of capacities, actions, and participation of key
stakeholder groups
Illustrate where further efforts must be made to improve
stakeholder capacity and participation in trade policy process
Facilitate the development of a more inclusive trade policy
making process to create local buy-in of that policy within
Malawi
 Only such buy-in can ensure successful implementation of trade
policy and the subsequent realization of larger development goals of
the country
Action Variable
A. Identification of all key
stakeholders
B. Creating awareness about the need
for trade policy
Action by
MOIT
MOIT
Yes = 1.0
C. Establishment and functioning of
formal consultative mechanisms
MOIT
Several created and functioning = 1.0
D. Regular information flow to the
stakeholders including on the content
of trade policy
MOIT
Ad hoc and/or irregular = 0.5
Part I Score
E. Regular participation in the process
and feedback to the relevant
authorities
F. Faithful representation of and
regular feedback to the represented
constituencies
MOIT
Other relevant government
ministries/agencies
G. Acquiring relevant knowledge and
expertise
Part II Score
Other relevant government
ministries/agencies
Other relevant government
ministries/agencies
Other relevant government
ministries/agencies
Action Value
Some identified = .5
3.0/4.0
Yes = 1.0
Yes = 1.0
Some knowledge and expertise = 0.5
2.5/3.0
Action Variable
Action By
H. Regular participation in the process
and feedback to the relevant
authorities
I. Faithful representation of and
regular feedback to the represented
constituencies
J. Acquiring relevant knowledge and
expertise
Part III Score
Private sector and business umbrella
organizations
Yes = 1
Private sector and business umbrella
organizations
Yes = 1
Private sector and business umbrella
organizations
Private sector and business
umbrella organizations
Civil society organizations
Some knowledge and expertise = 0.5
K. Regular participation in the process
and feedback to the relevant
authorities
L. Faithful representation of and
regular feedback to the represented
constituencies
M. Acquiring relevant knowledge and
expertise
Action Value
2.5/3.0
Irregular = 0.5
Civil society organizations
Occasional representation and/or
irregular feedback = 0.5
Civil society organizations
Some knowledge and expertise = 0.5
Part IV Score
Civil society organizations
1.5/3.0
ITPM Index Score
All stakeholders
9.5/13.0