Malawi: Expanding U.S. trade relations

Aired September 2006

Small is beautiful and the country of Malawi is a true expression of this. One of the smallest countries in Africa Malawi is a landlocked nation in southeastern Africa, tucked in between neighboring giants Tanzania, Mozambique and Zambia.

Malawi’s unique charm lies with the famous lakes, mountains and tea plantations, which create an enchanting and diverse landscape.

Malawi is a stable and peaceful democratic country that meets all the prerequisites for a thriving developing country. In recent years it has undergone a social and political transformation which has created a new optimism within the country. It is now poised to capitalize on its comparative advantage through greater cooperation.

Malawi maintains excellent diplomatic relations with principal Western countries. Its close relations with South Africa throughout the apartheid era, strained its relations with other African nations. Following the collapse of apartheid in 1994, Malawi developed, and currently maintains strong diplomatic relations with all African countries.

The transition from a one-party state to a multi-party democracy significantly strengthened the already cordial U.S. relationship with Malawi.

FINANCE

The Malawi Government has embarked on an ambitious reform program to liberalize and modernize the financial system.
The plan is to increase the availability of and access to financial resources and services.

Already exporters are allowed to operate foreign accounts in authorized banks and anyone can apply to operate a bureau de change throughout the country. There is also no exception on the amount of foreign currency that can be brought into Malawi. The exchange rate is now freely established on the basis of supply and demand for foreign currencies.

The main feature of government's comprehensive financial reforms program is the use of more indirect and market oriented monetary control mechanisms, rather than reserve Bank control mechanisms. The strategy is to introduce measures to broaden the capital market and improve the mobilization of domestic financial resources.

TRADE

The Malawi Government has taken a pro-active stance to attract foreign investment into the country. Several industrial estates have been established. These have all but eliminated the obstacles investors have faced in acquiring land for factory sites.

Export Processing Zones offering special incentives to investors have been set up and manufacturing licensing requirements have disappeared in all but a small number of industries.

Foreign investment is welcome and inward transfers of capital are not restricted. The chief trade partners are South Africa, Zimbabwe, Germany, the United States, and Japan. Malawi also has bilateral trade agreements with two of its major trading partners: South Africa and Zimbabwe, both of which allow duty-free entry of Malawian products into their countries.

Most of the country's foreign trade is conducted via Salima, a port on Lake Nyasa, which is connected by rail with the seaport of Nacala in Mozambique.

The manufacturing sector is agro-based and mainly involves agro-processing. Outside of agriculture manufactures are limited to basic goods, such as processed food and beverages, lumber, textiles, construction materials, and small consumer goods.

Investment in the apparel industry would enjoy a number of incentives offered to bonded factories and export processing zones.

MINING

Malawi is endowed with a number of mineral resources that are not presently being developed. At present, mining operations are limited to small-scale production of coal, cement, limestone, rubies and sapphires.

Through the Ministry of Natural Resources and Environmental Affairs, the government is developing a policy to promote the mining industry.

The energy sector relies almost 90 percent on hydro-electric power. There are 4 hydro electric power stations but Malawi is planning to diversify its energy sources.

AGRICULTURE

Malawi's economy is based on agriculture, which accounts for about 38 percent of Gross National Product and more than 90 percent of the country's export earnings.

It is among the world's least developed countries, with most of the population involved in subsistence agriculture.
At least 80 percent of agricultural produce comes from smallholder farmers on customary land. The rest is produced by commercial farmers on estates. The principal crops are corn, cotton, peanuts, cassava, and potatoes. With the aid of foreign investment, Malawi has instituted a variety of agricultural development programs.

Malawi has been a cotton growing country since the colonial era. The Government incorporated the cotton sector as a key element in its poverty reduction and growth strategy. Emphasis is on building vibrant integrated cotton and textile industry.

The second most important export crop for Malawi is Tea, and this contributes some 7.9% of total export earnings. Since tea is such a major currency earner, additional investments are necessary through joint ventures with the Malawian companies in the processing of tea and other by products, and also in the actual farming of the crop.

TOURISM

Malawi is a distillation of the true Africa experience which has made central Africa famous. It is the regions highest peak with an abundance of a natural wild life and stunning varied sceneries.

The Malawian people tend to be extremely friendly toward travelers. Its healthy climate, especially in the dry season, is ideal for holidaymaking.

There are many resort and leisure areas, clubs and lodges along the length of Lake Malawi.

Malawi is dotted with large rock formations known locally as inselbergs. It gives the landscape a unique feel and offers the energetic explorer abundant opportunities to rock climb and trek trough the tea plantations and tobacco crops.

Malawi also has a rich abundance of wildlife, where nature moves with the people and survives in harmony. For the tourist who wants the great African experience, seeing wildlife in there natural habitat, the Viphya Plateu and Vwaza Marsh are a must.

The Viphya are pine plantations said to be the largest in Africa. Patches of indigenous forests survive between the rows of pines, making it a must to explore on foot or by mountain bike. It is renowned for its herd of elephants, zebras and buffalo, living in their natural habitat.

Eco lodges are very popular in the area on the South Western shore of Likomo. It is a peaceful eco friendly tourist destination, keeping in touch with the natural surroundings.

Another beautiful and untouched area up for development is the region around Lake Malawi. The tourism board is looking to develop this region for eco friendly tourism, so that the natural wonder bestowed on the country keeps it natural charm.