Industrialisation has been widely understood as a process in which countries undergo a transformation process out of primary agriculture and extractive industries into manufacturing and services industries with higher value-added over time. This is expected to improve the livelihood of people as it translates into higher incomes than in the primary agriculture. Increase in services industry may also translate in efficiency in production as well as distribution of goods which impacts on output and further impacting on livelihood of the population.
For the case of Malawi, turning the country into a producing and exporting economy from a predominantly importing and consuming one has been the main underlying philosophy of the national development plan, the Malawi Growth and Development Strategy (MGDS) which is being implemented since 2006 and expected to end in 2011. As the implementation period draws to an end, it is time to reflect on whether Malawi is near to achieving the desire of becoming a predominantly producing and exporting economy.
The 2010 Economic Report for Malawi reveals that agriculture has continued to be the mainstay of the economy contributing over 40 percent to GDP while the industry sector only contributes an average of 8 percent. Agriculture accounts for 90 percent of foreign earnings with tobacco being the main cash crop. Though there have been attempts to diversify the economy away from agriculture, not much has been achieved. It is, therefore, imperative that deliberate actions and not just policies are implemented to fast-track this diversification. With the strong pressures to have an international tobacco ban, Malawi's economy seems to be sitting on a time bomb.
Industrialisation is an alternative to the economy Some voices such as the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), through various forums have spoken out on the need for deliberate government interventions to encourage industrialisation. Where are we getting it all wrong? Will Malawi develop with tobacco and tea plantation? Why are we not learning from others like the Asian Tigers and successful African economies such as Ghana, Mozambique and Botswana? Some of the questions to be considered are as follows?
1.Why is the industry not growing as desired?
2.What has Malawi not been doing right?
3.A lot of policies have been developed to address challenges facing the private sector since 1990 when the open economy regimes were adopted but the contribution of the sector to the growth of the economy is not increasing as much. What are we not doing right?
4.Is it possible for Malawi to develop without industrialising?
5.In what areas should Malawi concentrate on?
First we have to realise
First we have to realise that Malawi cannot industrilise without increasing investment. As we all know, savings in malawi are really low such that Foreign Direct Investment (FDI) is seen to be the best option to get the much needed investment. But here is where we are getting it wrong.
For a company or coorparation to invest in Malawi and not in Zambia or any other country for that matter, it makes research on profitability of its business in different contries. This profitability depends on availability of factors of production (Land, Labour and capital) as well as ease of doing business and cost of production. The last part, cost of doing business is what is killing the country.
Since 1990's the country has been having eletricity and water problems. Add to that forex shortage and admnistrative haddles, investment seems to move to other countries.
Unfortunately, the country has concetrated on tax incentives to attract investment. But what this does is to make old companies more profitable than attract new ones.
What the country need is to deal with the water shortage, take the loan from World Bank and interconnect the Malawi eletric greedlines with those of Mozambique (generating our own eletricity is a good idea but lets face it, it will not happen in the next 8years. World Bank and Malawi studies have shown that the interconnection is our best option, what are we waiting for?). And lastly, float the Kwacha. Kenya was facing massive forex shortage in the 1990s. what it deed was to float their currency and market forces stabilised forex needs. This has worked not only in Kenya but in many other countries.
We have a good setting for industrilisation. A politically stable and growing economy, a fair tax system, and cheap labor force. It is my belief that if the problems sighted above are corrected,the rate industrilisation will improve.
I agree with you on many
I agree with you on many things. however where is the starting point? Are the institutions we have operating for their cause.
This comment is incomplete.
This comment is incomplete. The point though is that there is a discussion on Industrialisation in Malawi. The questions being paused. The startign point should be the level of industrialisation Malawi is at. The sectors also matter and then look at the policies.
I have a number of points to
I have a number of points to discuss but for now, I wish to capture the following.
First, we have a Malawi that is still based on Arts than Science in its education systeme. There are for example only four Enginneering degrees in the whole UNIMA. The highest intake to the Univesrity is not to these programmes. As a result in a way of agreeing to Ligomeka above, people do not think interms of investment. We all want our people to graduate and work for Press or NB or Government. Who is going to do the Industrialisation?
Secondly, our financial institutions are still backward, thinking and doing. The problem is that they get contented so quickly that a new application for a loam from a relatively unknown person does not make them move and hold them up. If you are somebody of the Asian origin, its easy to get one. Do we need Islamic Banking may be? Again, I have not seen innovations in the way risk is managed and lowered. We still depend on a house. In other words, brand new college graduates with a brilliant idea must wait untill they are 45 years old and they own a house to implement their dream. How long Malawi? Cant these Financial Institutions go visit the western countries and learn how they help out?
For now, so long.
If we look at what has been
If we look at what has been described at industrialisation, you will notice that it is a transformation. So the question is..at what point are we? Are we in the process of transformation? have we seriously began or we ae still thinking about it? or we are stuck somewhere? Perhaps we are chewing more than we can bite?
Luckily I have also worked in key Ministries of Trade and also Agriculture. I have also worked together with MIPA (or has it changed). I have been exposed to the working of govt machinery. Even though I went out of the country for many trips and official duties, My eyes had not completely opened.
Now I have spent sometime in the west and this is where the many things I learned as an economics student made sense. To be fair i think Malawi has tried to bite more that she can chew. There are a lot of people who know what should happen in malawi however they have not been given a chance (Polictical issues??/) Its been a difficult balance.
Having potentially bored everyone with my opening two paragraphs, I still belive Malawi should pursue mass food (not maize only) production of high value. For example wheat which is a basis for many good quality food products. The trend now is simple, China and India are exploding in income and soon they are demanding high value food because they can afford it. The current levels are not enough 9thats why china is leasing land in Zambia to produce food) . Can malawi benefit? Absolutely..we have water masses and land and am sure people can be trained with a good targeted strategy. However rather than producing for export, it should be processed within and export to where it is demanded (china/india). My experince with min of trade has taught me that expoorting to some economic blocks is not strait forward as we may think because of trade agreements and other safegurding measures eg (sanitary measures) which can always be sorted out.
This is just an example..I wish I could go on and on.....
In his discussion at the
In his discussion at the Debate, prof Ben Kaluwa mentioned the old theory of Compoerative Advantage and he some what disagreed to it. I want to disagree with him and state that Malawi still has some resources which if carefully exploited can be a good swtarting point to Indistrialisation. We still have a lot of water and good soils including affordable labour. These resources if well used can lead to a vibrant private sector propelling the growth of the economy.
for example, the green belt initiative with the acquaculture Initiative all launched by the Head os State can feed the whole SSA, bring us forex which we can use to buy machinery. We can also deliberately go into service industry in a way of a jump. This is the tertiary sector which if gaurded well can bring wonders. Notice that most financial institutions in Malawi are from other countries mainly Zimbabwe and RSA? Does that tell us something?
Hi,I havent had a chance to
Hi,I havent had a chance to look at Prof kaluwa's paper even if I did request it.
However the theroy of comparative advantage on face value would not very much hold nowadays. There are other factors..eg. political , regional trade agreements and the like.
The green belt initiative is still an initiative. Feeding SADC is still not enough because the quality of food demanded in SADC is still not of high value as compared to that which would be demanded from elsewhere, ege EU and India/China. For SADC you are only really looking at still exporting mainly maize and not high value maize products. Howver, if you look at pastry..there are many options to export to and all over a sudden the world opens up because there is demand!
These are just my thoughts
During the 'offline'
During the 'offline' discussions, someone asked a simple question to say ' Are the econimics books different, do our Political leaders read different books?' I see a gap
lets look at Kamuzu time. if we were to go on with that pace where would we be today? in my opinion, we would be abit far/better than today. Why? political reason. the gap we had brought /slowed us and this is purely by our political leaders. as Mr Desai mentioned some of these leaders open mouths when they are not supposed to and dont realise the impact of that on some sectors of the industry. so where we are getting it all wrong, is exactly with our politicians. I dont think these ideas would be news to the current political leaders, no. My starting point would be to educate these politicians, let them not be selfish rather focus on the welfare of the nation.
wow, where are we getting it
wow, where are we getting it all wrong? the question is clear. And the answers are; as a country, we are failing to coordinate what needs to be sorted first. Physics is at work, "Newton's first Law of Motion" and honestry, i am not sure whether, the most publisized MGDS have produced much expected results. (enabling environment is not conducive)
for example, as a Country, what is it that we produce that we can be proud of? i mean, on the basis of comparative advantage with other nations. Tell me.
Let us do more exports and less imports. that is rhetoric words from learned men and women with PHDs, and Masters.The University of Malawi, has not helped matters. There are many PHDs in Agriculture and other fields and compare % of those pple with the paper ...who have become employers.(lack of entrepreneurial spirit)
jst a specific example, of entrepreneurship spirit: a company in UK placed an order of groundnut aflatoxin free (acceptable levels of aflatoxin <5ppb) and promised to buy at k6,000 per KG equivalent. in Malawi, the highest price at farmgate or NASFAM is K200/KG in Dec. but as a country, we are failing to take advantage of the demand. Where is our PHDs or Institutions like ICRISAT/ higher learning to sort the problem. Guess how much malawi would get in forex if it exported all the 293,948 MT(2008/09) and 295,329 MT (2009/10)of groundnut it produced.
This is where we are getting it wrong. Football starts at the centre point. Do we have one? Maybe Maknet can help identify the centre.
INDUSTRIAL GROWTH OF
INDUSTRIAL GROWTH OF MALAWI
Sun Hotel in Blantyre debate brought to surface interesting thoughts, suggestions and questions on Malawi’s industrial growth. To progress subject matter will need continuous debates including participation of more numbers having stakes and interests directly or indirectly.
Hopefully, through MAKNET web interactions we will find way forward.
This is very important topic and should not be one off discussion. This is Malawi Inc.’s long term business proposal.
Experiences show we are good sprinters but not long distance runners. This is a relay race; players have to perform to win.
Since 1970s, we are blowing trumpets of industrialisation to become exporting nation and not importing and consuming nation.
Since independence number of industries was established in Malawi and many closed, few survived or expanded to date.
There are still opportunities for LDC countries including Malawi to join industrialised nations. Our failure in past were for number of reasons. If we do not act today we will be left far behind.
Let us look at the questions raised:
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Firstly, what Malawi has to offer to attract industrialisation?
Malawi is yet to exploited its huge fertile land and fresh water resources to improve, increase crop production such as cotton, rice, pulses, fruits and vegetables both for canning and sold fresh. There is room for introducing new varieties as and when infrastructure and capacity improves. Malawi’s fertile land, fresh water and labour force is major strength followed by unexploited minerals which requires foreign investments and expertise.
Given required support above sector once fully established will create direct employment for over
One million people mostly primary and secondary school leavers.
How many dropouts we have per annum? These industries do not require graduates. Most of them will be trained on the job.
About 150,000 will be employed in the administrative positions.
About 5000 employed in the middle management position.
Over 75% finished production will be for export.
Positive impact will be foreign exchange earnings. Banks, insurances, wholesale retail sector, service sector, transport, travel will benefit.
Economy, GDP, growth rate index will move upwards.
Less unemployed on the streets, less crime rate, population’s confidence will grow; politics will be fought and discussed on economy base.
Is this pipe dream? Do we have ready markets?
Can these industries kick start the Industrlisation of Malawi?
Developed nations of the world are busy and focusing on high technology industries and businesses. They will need good supply of food items, clothing, textiles and raw minerals.
This is reality, having good quality, supply chain consistency, competitive pricing and product line improvements through research and development there is a huge export potential.
Malawi having trade protocols, AGOA, ACP/EU, SADC, COMESA including fair trade regimes with EU and Indian sub continent gives preference for our exports. When markets open up under the WTO protocol Malawi will be ready and in position to compete in the open world markets.
Those who have travelled into Europe and USA must have observed chain stores such as Wall Mart, and Gap sell only imported goods, you will hardly find locally made goods. Malawi can be in the supply chain too.
Existing problems facing Malawi in order to attract industrialisation are already on the tables of stakeholders.
University and poly students and journalists has job to highlight, do follow up on the missing links for creating environment to attract investments, goodwill, interest of both local and foreign investors.
Where do we focus?
1 A list developed nation, Malawi (LDC) need favourable policies and deliberate interventions to kick start industrialisation by involving local small scale entrepreneurs. Government of the day has to put in place deliberate policies and resources for the investors and entrepreneurs in small scale sector. Here we do not need to invent new formula. We can adopt Mauritius, Singapore, Bangladesh and India way. This is a debate which we must be having in every district from Nsanje to Karonga. Who will take the lead, may be District Commissioner?
2 Trading centres in every district of Malawi which was vacated by Asians in 1960s. Some still have potential for developing small scale industries such as Carpentry, steel fabrication, tin smith, fresh vegetable packing, tailoring, rice mills, oil mills, mini sugar mills and consumable items in demand by villagers. There are items which can be produced and/or process with value addition for local consumption. To be competitive, small scale industries needs supporting legislations, deliberate policies. (E.g. India did not grant licences to large scale industries to manufacture pad locks and rim locks. Today over half a million small scale lock makers in the villages are benefitting. Few grew into mega industries over 50 years) For unknown reason Malawi always opted for imported items which small scale industries could produce and supply. (e.g. second hand clothing has suffocated small tailoring shops) This is a topic will require debates and political will starting from villages to the Capitol Hill. Without encouraging small scale businesses and industrial sector we cannot be talking of attracting big local or foreign investments in industries. If we can afford to grant subsidies to farmers why not small sector industries?
3 After independence donor partners and Government put in place various institutions for small scale sector. Resources, training and funding were disbursed through these institutions (one can make a long list of these institutions and their achievements and failures. Most died of no funding, most closed doors without proper audits. Few remaining are on papers only. Our journalists can dig skeletons, why were not successful? Many of them failed due to political interferences, thefts by employees, mismanagement and of course ATTITUDE problems of all individuals involved in the system. (“ATTITUDE” was key word mentioned often during the de with support from government, donor partners, financial institutions including private sector as a joint venture partners subject to contract viable small scale industries in selected districts can be established. One district in Malawi developed successfully will become a business model for others to follow. Sri Lanka developed on similar model.
4 We adopted open economy regime but we did not create business climate for industries. Malawi’s index “to do business in Malawi”. Thanks to MCCCI and the private sector involved including some sectors of Government, Malawi has narrowed the gap of constraints. We still have to a go long way. Many issues are remaining to be tackled. They are being debated and discussed amongst all stake holders. These constraints will need political will and leadership to break the concrete walls lying ahead. We as a nation have failed to attract investments in manufacturing sector. We have allowed huge shopping centres and more are being built to sell 99% imported consumer goods. Very few shops sell made in Malawi items. Very few shops are Malawian owned.
5 Nation cannot boast of economically developed without industries. Malawi has to industrialise or be doomed. Over 13million population and still growing cannot survive only through agriculture and that to with chase (hoe). We must create real jobs through industrialisation. Human resources churned out by our schools, polytechnics, universities cannot all be absorbed by governments, banks, insurances, legal firms, teaching profession and politics. We need to create jobs in agro processing, value addition on imported raw materials, cotton value chain and sub industries to support larger industries. Without industries we will only remain as labour supplier to developing countries.
6 Each one of us ( including you and me) be a student, teacher, professor, private sector individual, entrepreneur, journalist, social worker , community leader or aspiring politician will have to spare time for the Nation to discuss to lobby , to influence to vote towards Industrialisation. You will think of a National interest first and nothing else. We have lacked honest hardworking leaders for this sector and have not been able to put up a team to address and remove constraints towards Industrialisation. We have solutions for problems but occasionally we the people who are to solve the problems become problem. Donor partners and private sector entrepreneurs are ready to assist in overcoming hurdles we may face. We need to work as a team and not individuals or partisans.
7 ‘ATTITUDE’ word was mentioned number of times during debate. How do we address this animal? How do we learn to overcome this problem? Is this a major problem of our society? Can we address it through our primary schools, religious teachings; good parenting debate is on...
Apology in advance for any errors and omissions, grammar and spelling errors. My objective has been to ignite that fire in minds of to whom it may concern.Malawi is rich and has huge potential, let us not squander and waste energy by getting into jealousy, greed, dirty politics and fear of unknown. We have to build the Nation.
Attitude! Altitude!. this is
Attitude! Altitude!. this is really a very big challenge to our economy. i feel the education sector should be crafted in a way to address this. let our students be taught at primary education on how to be entrepreuners and be innovative etc.
Reading Yersterdays paper, i
Reading Yersterdays paper, i see Government is talking seriously about making cotton a model crop, as one of the participant in the offline discussion at Malawi Sun Hotel prayed for. Hoping this will be done as soon as posible. i guess there is no need to start developing cotton councils, strategies etc. lets go straight to implementation, whether subsdies, or loans to big farmers...Cotton is the way to go.