3 ACHIEVING SUSTAINABLE ECONOMIC ROWTH AND DEVELOPMENT

3.1 ASPIRATIONS TO ACHIEVING SUSTAINABLE GROWTH AND DEVELOPMENT

Malawians aspire to achieve sustainable growth and development and become a middle income country with per capita income of US$1,000 by the year 2020.

3.2 STRATEGIC CHALLENGES AND OPTIONS

3.2.1 Developing the Manufacturing Sector

3.2.1.1 Strategic Challenges
The manufacturing sector currently makes a small contribution to national income (12% of GDP) and employment and there is limited industrial diversification. In addition, there are weak inter-and intra-industry linkages.

The strategic challenges to be addressed in order to develop the manufacturing sector include: pursuing of dynamic comparative advantage; promoting of resource-based industries; ensuring conformity of products to international standards; undertaking marketing functions; creating a conducive environment for the growth of small and medium scale enterprises (SME's); invoking World Trade Organisation (WTO) safe-guard provisions relating to injury to domestic industry arising from import liberalization; and maintaining an appropriate macro-economic environment.

3.2 1.2 Strategic Options
The options that are available to address the above-named challenges include the following:-

1. undertaking human resource development aimed at establishing and institutionalizing creativity and design in schools at all levels;
2. training exporters in international marketing management;
3. strengthening the Malawi Export Promotion Council to enable it provide production and marketing advisory services at enterprise level;
4. creating an autonomous industrial research centre;
5. attracting foreign capital and promoting and encouraging infrastructure investment in export industries;
6. providing information on products that can be made from locally available natural resources;
7. providing special incentives to industries locating in rural parts of the country;
8. establishing export targets for key industries; establishing a network of commercial representation in critical foreign markets; and
9. providing the necessary government support services.

3.2.2.1 Strategic Challenge
The mining sector is very small and contributes only 3 per cent to GDP. The few existing mines are of small and medium sizes and their linkages with the manufacturing sector are weak.

To develop the mining sector, the challenge is investing in prospecting, encouraging small-scale mining; enhancing the role of catalytic institutions; building capacity; ensuring easy access to mineral rights, stopping illegal exports of minerals; and promoting research and development

3.2.2.2 Strategic Options
The options that are available to meet the above challenges include:

1. providing adequate resources for basic mapping and survey work;
2. providing a special package of incentives;
3. undertaking more exploratory work to identify mineral deposits with economic potential;
4. intensifying investment promotion and making available information on the activities of the sector;
5. strengthening the institutional set up and developing human resources;
6. providing necessary infrastructure;
7. revising the Mines and Minerals Act to make it more investor friendly; and
8. providing adequate funding for research in mining activities.

3.2.3.1 Strategic Challenge
The agricultural sector's performance is below its potential due to, among other factors, deficient policies, ineffective institutional arrangements and capacities, and inefficient investments.

To increase the productivity of agriculture, the sector requires a multi-dimensional strategy that uses existing resources and technologies efficiently. The strategic challenges to be addressed include:

1. increasing access to land by smallholder farmers;
2. increasing access to credit and farm inputs;
3. improving agricultural technology;
4. preventing land degradation and deforestation;
5. improving agricultural marketing systems;
6. promoting agricultural diversification;
7. improving agricultural extension and farming; and developing irrigation systems.

1. undertaking land reform;
2. monitoring and enforcing the current moratorium on the conversion of smallholder land to estate land;
3. developing sustainable farming systems for marginal lands;
4. raising land rents in order to create incentives for the better utilization of land;
5. establishing an agricultural credit guarantee scheme and establishing a land bank to provide agricultural credit;
6. widening the window of credit provided by financial institutions to all agricultural stakeholders for production, marketing and agro-processing;
7. empowering farmers through the formation of associations and cooperatives in production and marketing;
8. improving technology generation and transfer; promoting inter-cropping practices;
9. extending and improving irrigation,
10. promoting the use of organic fertilizer, and communal catchment conservation techniques;
11. increasing horticultural production;
12. providing appropriate incentives and finance for research and development;
13. providing export market information, and
14. expanding livestock farming and the growing of high value crops.

3.2.4.1 Strategic Challenge
The national savings rate of only 15 percent of GDP is too small to meet the investments of the country. The strategic challenge to increase savings and investment is increasing national savings; encouraging the growth of local and foreign direct investment; and developing efficient financial market

3.2.4.2 Strategic Options
In order to address the above challenges the options that are available include:

1. encouraging diversification of financial institutions and investments and enhancing the role of the private sector through removing structural and institutional constraints;
2. mounting public education campaigns to encourage thrift and promote savings;
3. encouraging the formation of savings and credit associations, clubs, and co-operatives;
4. setting up a mutual fund;
5. providing adequate serviced land to private investors;
6. providing factory shells, industrial parks and industrial estates;
7. providing efficient transport, telecommunication, energy and water infrastructure; and
8. influencing the donor community especially multilateral development banks to try and shift their role towards direct financing of the private sector.

3.2.5.1 Strategic Challenge
The financial sector is currently under-developed. The number of financial institutions and their instruments are limited. Access to credit and financial services is also very limited.

The challenge to be faced in developing the financial sector include: increasing the supply of medium and long term loans; strengthening linkages between and within the formal and informal sectors; increasing the supply of finance for sectors of strategic importance in accelerating the country's economic growth; ensuring consumer protection; and enhancing competition.

3.2.5.2 Strategic Options
The options to develop the financial sector include:

1. encouraging the establishment of more deposit taking institutions with a broader composition of their deposit base and wider range of financial instruments; and
2. establishing credit guarantee schemes and deposit insurance schemes.

3.2.6.1 Strategic Challenge
Malawi's tourism industry is at an infant stage and the necessary infrastructure for its development is inadequate. However, the sector can make substantial contribution to foreign exchange earnings, employment and economic growth.

The challenges to be faced in the development of domestic and international tourism include: encouraging community participation; promoting the use by more Malawians of the country's tourist attractions and facilities; strengthening and co-ordinating planning efforts in the public and private sectors; and ensuring that the country's tourism development is environmentally friendly.

3.2.6.2 Strategic Options
In order to meet the above challenges, a number of options are available. These include:

1. encouraging local and foreign investment in tourism, and providing technical assistance to local entrepreneurs on the proper management of their establishments;
2. marketing the country as a tourist destination to both foreigners and Malawians
3. developing human resources development programmes in the industry;
4. promoting a high standard of customer service;
5. promoting domestic tourism through community participation and improved treatment of local tourists by the hospitality industry.
6. providing and maintaining tourism related infrastructure;
7. creating other tourist products such as sports and culture;
8. establishing an autonomous tourist board and a tourist fund facility;
9. coordinating planning efforts of the public and private sectors; and
10. protecting the country's tourist attractions and cultural heritage.

3.2.7.1 Strategic Challenge
Although aspiring to be in business, most Malawians do not have the necessary education and skills to run businesses. In addition, inadequate access by aspiring entrepreneurs to institutional credit hampers entrepreneurial spirit

The major challenge to be met, therefore, include the inculcation of entrepreneurial and business skills in Malawians and increasing their access to credit.

3.2.7.2 Strategic Options
In order to address the above challenge, options include:

1. introducing enterpreneurship training at primary, secondary and tertiary education levels;
2. strengthening and increasing vocational training institutions and technical colleges; and
3. setting up financial institutions for business development as well as increasing access to finance.

3.2.8.1 Strategic Challenge
The strategic challenges to creating an export-oriented economy are: providing business and technical advisory services; diversifying the export-base and markets; producing competitive Malawian products; and providing the necessary government support services.

3.2.8.2 Strategic Options
Options that are available for meeting the challenges above include:

1. encouraging export of processed products;
2. modernizing agriculture and developing agro-industries;
3. introducing tax holidays to export manufacturing firms;
4. taking advantage of economic integration efforts;
5. establishing industrial production centres, export production groups, and co-operatives to provide common production facilities so as to reduce individual production costs;
6. establishing a national productivity centre;
7. making the tax regime more export-friendly;
8. reviewing export incentives regularly; and
9. introducing an Export Development Fund for small and medium-scale enterprises (SMEs).

 

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