| Overview : The Government of Malawi developed and launched the National Export Strategy (NES) in December 2012 with the primary objective of boosting and promoting exports of the country’s prioritised productive sectors. These sectors are the Oilseeds and Oilseeds products, the Sugarcane and Sugarcane products and the Manufacturing sector, which include sub-sectors like Beverages, Agro-Processing, Plastics and Packaging and Assembly. The NES is a clearly prioritized roadmap for building Malawi’s productive-base and to generate sufficient exports to match the upward pressure on Malawi’s imports. It is a key strategy in attaining the goals of Malawi’s Growth and Development Strategy II (MGDS II) and central to accomplishing Malawi’s desired move into exporting of high value-added goods and services and to reducing the country’s reliance on the export of raw or semi-raw commodities. It is worth noting that the manufacturing sector in Malawi accounted for only 10% of GDP in 2011, relying mainly on the processing of agricultural commodities (tea, tobacco and sugar) and is predominantly inward-oriented as only 14% of manufactured products are exported. The low contribution of manufacturing into Malawi’s GDP is due to the limited investments attracted in the sector over the past few decades. As the country aims at promoting private sector development and industrialize in order to become self-sufficient and reduce its reliance on donor support, it is imperative for Malawi to become a competitive destination for both domestic and foreign investment through, inter alia, the provision of a business friendly and enabling environment and strategic incentives for investments in the potential productive sectors. Many countries in the region have also sought to improve on their investment climate through the extensive use of investment and export incentives. The effectiveness of incentives in attracting investment is, however, unclear as little consensus has emerged from the ongoing debate. Some experts believe that incentives are ineffective in attracting foreign direct investment, while others argue that investment incentives contributed significantly to the rapid economic growth of countries such as Singapore, Mauritius, China and South Korea. The literature suggests that investors are attracted by strong economic fundamentals in the host country. The most important of these include available comparative advantages, market size and real income levels, skill levels in the host economy, the availability of infrastructure and other resources that facilitate efficient specialisation of production, sustainable and socially/ environmentally acceptable growth opportunities, trade policies, and political and macroeconomic stability. The availability of (serviced) land or business premises via lease or purchase at competitive prices, availability of reliable services such as water and electricity, access to business finance, access to information and capacity building measures especially for MSMEs, smooth and transparent procedures for business and other licenses play an important role as well, as do safety and security and general living conditions. For foreign investors fast and transparent processes regarding permits, visa and opening of bank accounts are also crucial. However, the location of investments may also be influenced by various incentives offered by governments to attract foreign investors or encourage local investors to start or expand business. These incentives may take a variety of forms. They include for example fiscal incentives such as tax holidays, lower rates and taxes for investors over a certain period of time, financial incentives such as grants and preferential loans to investors, easy access to serviced land and/or business premises, as well as other incentives like market preferences and monopoly rights. Although no reliable statistics of the size of these incentives are available, a detailed study by UNCTAD suggests that incentive activities have increased considerably since the mid-1980s. Empirical research shows that international investment incentives play only a limited role in determining the international pattern of foreign direct investment. Factors like market characteristics, relative production costs and resource availability explain most of the cross-country variation in investment inflows. Nevertheless, it is clear that international investment incentives might play a role for investment decisions on the margin. It is against this background that the Government of Malawi through the Ministry of Industry and Trade (MoIT) in conjunction with the Malawi Investment and Trade Centre (MITC) is inviting Proposals from suitably qualified firms/companies for consultancy services to conduct a comprehensive analysis and review of investment, production and export incentives in Malawi, with a view to proposing and developing strategic and catalytic investment, production and export incentives that could generate the desired investments and exports by attracting both domestic and foreign investors into the competitive productive sectors. The final outcome of this exercise will also feed into the Comprehensive Tax Reform to be undertaken by the Ministry of Finance, Economic Planning and Development in the country. |
