13 September 2007 Original: English UNITED NATIONS
ECONOMIC COMMISSION FOR AFRICA
Confidential
Assessing Malawi’s Dual Membership in COMESA and
SADC
Acknowledgment
This report was prepared by a team of experts from the United Nations Economic Commission for Africa (UNECA) under the general guidance of Jennifer Kargbo, Director, ECA Subregional Office for Southern Africa (SRO-SA), Robert Okello, Director of NEPAD and Regional Integration (NRID) and Hakim Ben Hammouda, Director of Trade, Finance and Economic Development Division (TFED).
The team was led by Joseph Atta-Mensah, Chief, Regional Integration (NRID) and Alfred Latigo, Senior Economic Affairs Officer (SRO-SA), and included Ernest Dhliwayo, Senior Economic Affairs Officer (SRO-SA), Cornelius Mwalwanda, Principal Adviser, ECA Geneva Office, Stephen Karingi, Chief, Trade and International Negotiations Section, Remi Lang, Economic Affairs Officer, Trade and International Negotiations Section, Mfunwa Mzwanele, Economic Affairs Officer (SRO-SA) and Ms.
Mariem Ben Hassine, Consultant at the ECA Geneva Advisory Services.
The report also benefited from inputs provided by the following colleagues from different divisions:
Stephen Maxwell Donkor, Regional Advisor, Water Sector, Pancrace Niyimbona, Economic Affairs Officer, Energy Sector, and Makane Faye, Regional Adviser, ICT.
The UNECA team would like to express their deepest gratitude to Dr. Ken Lipenga, the Minister, of Industry, Trade and Private Sector Development, Malawi, Newby Kumwembe, Principal Secretary, Harrison Mandindi, Director of Trade, Munthali, Assistant Director for Trade, Kokutulage Kazaura, Legal Officer and Study Coordinator, and the entire staff of the Ministry for their generosity, valuable assistance and support to the team.
PART I: BACKGROUND 1. Introduction
1. This report was prepared by the United Nations Economic Commission for Africa (UNECA) following a request received by the United Nations Under-Secretary-General and Executive Secretary of ECA, Abdoulie Janneh, from the Malawi Minister of Industry, Trade and Private Sector Development, Dr. Ken Lipenga, for UNECA to conduct a study that would assist the Government of Malawi in its decision whether to remain in the Common Market for Eastern and Southern Africa (COMESA) or the Southern African Development Community (SADC). Malawi needs to make this decision because both COMESA and SADC are moving towards the formation of independent customs unions in 2008 and 2010 respectively, and it is impractical for one country to belong to two customs unions. In addition, the European Union-African, Caribbean and Pacific Group (EU-ACP) Economic Partnership Agreements (EPAs) require that the sub-Saharan African regional blocs negotiating with the EU establish customs unions. However, Malawi is uncertain as to which negotiating bloc would best serve its interests.
1.1 Objective
2. The objective of the study is to provide comprehensive quantitative and qualitative information that would highlight the socio -economic costs and benefits of Malawi’s membership in COMESA and SADC. This would allow the Government of Malawi to make an informed decisio n about dropping out of COMESA or SADC in support of its Growth and Development Strategy: from Poverty to Prosperity 2006-2011.
1.2 Structure of the study report
3. The study report is organized into four parts. Part 1, the introduction, provides the background, scope of work and methodology of the study. Part 2 places the study within the context of Africa’s integration agenda and the integration programmes of SADC and COMESA as building blocks for regional integration, and also makes a case for the need to rationalize the regional economic communities in Africa. It also examines Malawi’s membership in COMESA and SADC. Part 3 describes the nature and scope of the study and provides a summary of the outcome of the consultations between the ECA technical team and key stakeholders in Malawi and reviews previous studies on the issues addressed by this study. Part 4 contains the major findings and recommendations, while Part 5 presents general observations and the conclusion of the study.
1.3 Issue
4. Dual membership in regional economic groupings as is the case with Malawi, has its associated costs and benefits. The costs include the considerable expenditure involved in maintaining membership in two organizations such as COMESA and SADC; the strain that multiple membership places on members’ budgets; administrative and human resources costs associated with fulfilling the obligations of multiple membership. This has led some African countries to withdraw from some regional economic groupings. The benefits of dual membership relate largely to the possibilities of deriving substantial economies of scale with respect to various activities typically associated with the expansion of trade and overall economic growth in a country. Similarly, a combination of several
small countries into one regional block would enable them to negotiate more effectively with other trading blocs. The economies-of-scale argument for regional integration and cooperation applies also to the joint provision of a range of infrastructural services where considerably lower per-unit costs might be achieved than when each country attempts to provide the same set of services individually.
5. The challenges facing Malawi have been compounded by conditions of international trade negotiations, as the two Regional Economic Communities (RECs) are moving towards the formation of independent customs unions in 2008 and 2010 respectively. Malawi has to decide to drop its membership in either COMESA or SADC because it would be extremely difficult for it to implement two common external tariffs (CETs), except if the CETs, of the two RECs are harmonized. In addition, the EU-ACP Economic Partnership Agreements require that the sub-Saharan African regional blocs negotiating with the EU establish customs unions. This EU-ACP requirement would become unattainable when both COMESA and SADC become customs unions as EPA negotiations are completed under the Eastern and Southern Africa Group (ESA), since it is not an economic grouping. Members should be part of either COMESA or SADC or both. While these negotiations come with positive outcomes, they also have negative economic and social impacts on fiscal revenues, trade creation, trade diversion and welfare that need to be assessed in relation to Malawi’s membership in any of the two RECs.
6. Logically, Malawi’s decision to terminate its membership in either of the two RECs would have to be based on similar considerations to those that gave rise to its membership in these organizations, i.e. political, economic, financial, social, cultural and geographical considerations. Thus, while a decision to terminate membership in either COMESA or SADC would largely have to be based on economic and financial reasons, cultural and historical factors would also have to be factored into the final decision. A number of issues would need to be examined, including any significant changes that have taken place to justify the termination of Malawi’s membership in any of the economic groupings to which it belongs; the costs and benefits arising from its decision to belong to only one REC; and the relative importance of internal versus external factors that could influence this decision.
7. While previous studies, including the most recent study conducted in 2006 by the Trade Law Centre for Southern Africa (TRALAC), have attempted to address some of these issues in respect of Malawi’s dual membership in COMESA and SADC, a review of these studies and the views of key stakeholders showed that these studies offered the Government of Malawi various options but did not give clear direction as to the country’s membership (ECA Mission Report, 22-27 February 2007).
Furthermore, given that this is a difficult decision with potentially serious risks for both the Government and the private sector, extensive consultations, which have not been adequately undertaken, are needed to further assist the Malawian authorities in making an informed decision. It is within this context that the Government of Malawi requested ECA to undertake a more comprehensive study.
1.4 Methodology
8. The methodology of the study has two building blocks. The first involves the collection of background information from various sources, including the Government of Malawi, COMESA, SADC, the private sector and development agencies. This aspect will include a review of documents and consultations with key stakeholders. The information collected will relate to key aspects of regional integration and the country’s overall development strategy. The second building block will involve an analysis of Malawi’s performance in either COMESA or SADC. Both quantitative and qualitative analyses of the study will be carried out based on the following key aspects of regional
integration:
• The nature of Malawi’s membership in COMESA and SADC, including membership costs; administrative/human resources costs; and costs of hosting/attending meetings;
• Objectives of COMESA and SADC relevant to the development objectives of Malawi;
• Status and trend of regional integration in COMESA and SADC since the Abuja Treaty went into effect in 1994, including stage of economic integration in sectoral developments through translation of regional economic community goals into national plans and budgets (e.g. infrastructure - transport, energy, water, information and communication technologies - natural resources, agriculture and trade);
• Volume and market for Malawi’s products: volume of trade to COMESA and SADC, including internal trade and informal cross-border trade;
• Overall intra-COMESA and intra-SADC trade as well as the external trade of both organizations;
• International trade negotiations;
• Viability of COMESA and SADC, including existing projects of relevance to Malawi’s infrastructure and services;
• Investments, foreign direct investments (FDI) flows and capital markets;
• Status of macroeconomic/institutional policy convergence as well as monetary and financial integration in COMESA and SADC as important preconditions for economic stability, economic growth and job creation - existence of benchmarks, criteria (indicators) and their practicality and accomplishment status;
• Political and cultural relations (impact of migration on welfare); and
• Analysis of the impact of membership decisions of countries in the two RECs.
9. From this analysis, the study team will make recommendations to the Government of Malawi about dropping its membership in either COMESA or SADC.
PART 2: THE INTEGRATION AGENDA 2.1 The Abuja Treaty
10. African countries, including Malawi, are vigorously using regional cooperation and integration as a strategy to achieve sustainable economic growth and development and to be an effective and major player in the global marketplace. However, the pace of integration has been slow and progress is very mixed.
11. Well aware of the slow pace of continent-wide integration, African leaders have provided a framework for implementation of the integration agenda, as enshrined in the 1991 Abuja Treaty of African Heads of State and Government. Under the framework of the Treaty, Africa would become an economic union by 2027, with a common currency, full mobility of the factors of production and free trade among the 53 countries that make up the continent. To achieve this vision, the Treaty suggests that the process of integration or the creation of the African Economic Community (AEC) be carried out over a period of 34 years (1994-2027), in six different stages of varying durations.
12. The first three stages of integration are expected to take more than 23 years (1994–2016).
During this period, the Treaty calls for the establishment of free trade areas and customs unions at the regional level. The first stage (1994 to 1999), calls for the strengthening of existing RECs and the creation of new ones, if necessary. Although not explicitly stated in the Treaty, the strengthening of the RECs could include mergers and consolidations, provided these actions lead to convergent integration.
13. The second stage (1999-2007) requires three plans of action. First, member states, through the RECs, are asked to stabilize existing tariff and non-tariff barriers, customs duties and internal taxes. Studies are suggested to be undertaken to inform the RECs on a timetable for the gradual removal of barriers to intra-REC trade and the introduction of common external tariffs. Second, member states would have to work towards the strengthening of sectoral integration at the regional and continental levels in areas such as trade, agriculture, transport, money and finance. Third, the activities of RECs are to be coordinated and harmonized.
14. The third stage, which should take no more than 10 years (2007-2016), calls for the creation of free trade areas and customs unions at the level of the RECs. At this stage, member countries would gradually eliminate internal tariffs and non-tariffs on intra-community trade and also adopt common external tariffs with third states.
15. Stage four (2017-2018) builds on the first three stages and involves the coordination and harmonization of tariff and non-tariff barriers among RECs. Africa would at that point be a customs union, with a common external tariff. Although not explicitly spelled out in the Treaty, the fourth phase sets the stage for a free trade area and a customs union at the AEC level.
16. An African common market is to be established at the fifth stage (2019-2022). The common market would be established through: (1) the adoption of a common policy for all sectors of the economy, (2) continent-wide harmonization of monetary, financial and fiscal policies and, (3) the free mobility of factors of production (capital and labour), including the rights of residence and establishment.
17. The sixth and final stage of the Treaty would see the establishment of the African Economic Community (AEC). This phase, which should not last more than five years, would begin in 2023 and end in 2027. The creation of AEC would start with the consolidation and strengthening of the African Common Market. At that stage, Africans would be free to reside in any part of the continent. In addition, there will be a single domestic market and no restrictions placed on the movement of capital, goods and services, as all sectors of the continent would become fully integrated. All these factors would culminate in the creation of a pan-African economic and monetary union with a single currency for the continent. A common African central bank would be created to manage and preserve the value of the single currency and conduct monetary policy for the entire continent.
18. There are at the moment 14 main regional economic blocs on the continent. The African Union (AU) recognizes eight of them as regional economic communities and the rest as inter- governmental organizations. This was re-affirmed at the AU Summit in Banjul, the Gambia, in July 2006, where the Heads of State decided to suspend the recognition of new RECs with the exception of the following: Southern African Development Community (SADC), East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA), Inter-Governmental Authority on Development (IGAD), Arab Maghreb Union (AMU), Community of Sahelo-Saharian States (CEN -SAD), Economic Community of West African States (ECOWAS), and Economic Community of Central African States (ECCAS).
19. The current thinking of AU leadership is that the timetable of the Abuja Treaty is too long and the process of continental integration has to be accelerated. This explains why the Constitutive Act that transformed the Organization of African Unity into the African Union and the Sirte Declaration 9.9.99 call for the acceleration of continental integration. Furthermore, the July 2007 Summit of the African Union would be devoted solely to the debate on the “Union Government of Africa.”
However, the similar mandates and objectives of regional integration groupings and multiple memberships by African countries in different RECs appear to be thwarting the continent’s integration agenda.
20. Despite the progress made by the RECs, Africa faces a number of challenges in advancing its integration agenda, including the following:
• Lack of political will: Despit e their good intentions, African leaders lack the political will and commitment to push forward the regional integration agenda;
• Overlap and duplication of integration groupings and multiple memberships: The multiple memberships of countries in various RECs and the overlap and duplication of functions of the RECs also act as stumbling blocs to the integration agenda;
• The fear of loss of sovereignty: African leaders fail to pursue integration agenda because of the fear of loss of sovereignty;
• Lack of a compensation mechanism: The lack of a compensation mechanism for the losers of the integration process also acts as a constraint for the full implementation of integration schemes;
• Weak infrastructure: Economic integration on the continent would not be successful without physical integration. Compared to world standards, Africa’s infrastructure network is generally very weak;
• Poor macroeconomic environment: The success of regional integration also hinges critically on member countries pursuing convergent macroeconomic policies.
Misalignments of tariffs, inflation, exchange rates, debt-to-GDP ratios, rate of money growth and other vital macroeconomic variables between member countries are disruptive to the regional integration process;
• Weak financial env ironment: Strengthening and deepening of Africa’s financial markets and institutions are also essential for mobilizing the financial resources needed to finance integration projects, particularly those relating to infrastructure.
2.2 Regional integration programmes of COMESA and SADC COMESA
21. The Preferential Trade Area (PTA) for Eastern and Southern African was constituted in 1981 and reconstituted as the Common Market for Eastern and Southern Africa (COMESA) in 1994. The member countries of COMESA are: Angola, Burundi, the Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, the Sudan, Swaziland, Uganda, Zambia and Zimbabwe. Among its objectives, COMESA aims to create a free trade zone, a customs union and a common market spanning the economies of the member countries.
22. On 31 October 2000, COMESA formally launched its Free Trade Area (FTA), with the immediate removal of tariffs and restrictive quotas by nine of its member countries. To date, countries that are fully FTA - compliant in the COMESA zone are: Burundi, the Comoros, Djibouti, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, the Sudan, Zambia and Zimbabwe.
Although 13 member countries have implemented the full FTA, some non-tariff barriers remain.
23. COMESA is working hard to establish a custom union in 2008. Under the COMESA common external tariff, goods imported from third states are classified into four groups: capital goods, raw materials, intermediate goods and finished goods. In its bid to have a harmonized tariff across member countries, COMESA has completed the coding of all tradable goods according to the current eight-digit classification system of the Harmonized Commodity Description and Coding System (HS).
24. COMESA has also taken measures to reduce non-tariff barriers. In 1986, a Protocol on Third Party Insurance was adopted to harmonize regional road insurance. This was followed in 1987 with the introduction of the Yellow Card insurance scheme as a minimum insurance protection against third-party inter-state road accidents. In 1996, it introduced a single, standard and highly simplified declaration form to replace the complicated forms required for customs clearance, warehousing, re- export and transit.
25. COMESA has also put in place a comprehensive programme for establishing a common market. The programme allows for free mobility of capital, labour, goods and services by 2025. The
Monetary Harmonization Programme (MHP), which had been initiated by the PTA in 1991 and endorsed by COMESA in 1994, is the centrepiece of regional macroeconomic policy coordination and harmonization within the COMESA area.
26. COMESA has deepened its integration efforts, particularly in the area of financial cooperation, creating three institutions: COMESA Clearing House, Eastern and Southern Africa Trade and Development Bank (PTA Bank) and PTA Re-insurance Company (ZEP -Re). The COMESA Clearing House was established in 1984 to alleviate the effect of foreign exchange scarcity on intra-regional trade. The PTA Reinsurance Company (ZEP-RE) was formed in 1991 with the objective of promoting the development of insurance and re-insurance, the retention of insurance business within the region and the building of related insurance capacity. The PTA Bank was established in 1985 to provide financial assistance for the development of regional trade and economic integration.
27. COMESA is also advancing policies to strengthen the region’s infrastructure, such as setting up COMTEL Communic ations. COMTEL, which was created with an initial investment of $US 172 million, is a regional telecommunication network covering COMESA and Tanzania. COMTEL was created to provide telecommunication inter-connectivity, harmonize tariffs and increase the overall productivity of the entire region.
SADC
28. The Southern African Development Community was established in 1994 following the transformation of the former Southern African Development Cooperation Conference (SADCC), which was formed in 1980 as a common front of political and economic liberation from the dominant neighbouring apartheid state, South Africa. The 14 member states of SADC are: Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Seychelles, Swaziland, Tanzania, Zambia and Zimbabwe.
29. The objectives of SADC are: the advancement of sustainable national and regional economic development; the creation of a common political system and common institutions; the achievement and preservation of regional peace and security; the productive employment of human resources and the sustainable exploitation of natural resources; the development and adoption of policies progressively leading to the free movement of goods, labour and capital; the development and transfer of technology; the coordination and harmonization of international relations; and the mobilization of external finance for the implementation of development and integration programmes.
30. The SADC Programme of Action (SPA) - with more than 400 projects - is the cornerstone of the development and integration agenda of SADC. Under the framework of the SPA, SADC launched a Trade Protocol in 2000, to create a free trade area amongst the member countries by 2008 and a customs union by 2010. The FTA is to be achieved through trade liberalization, an efficient use of factors of production, and a competitive investment environment. The SADC Trade Protocol makes no reference to timetables for the establishment of a customs union or a common market.
2.3 Need for the rationalization of Africa’s integration institutions
31. Countries may form separate groupings within larger blocks in order to accelerate integration
or join several blocks in order to maximize the benefits and minimize the risks of integration.
However, the presence of so many communities spreads limited resources thin, complicates the overall continental integration process, and puts enormous strain on governments’ ability and resources to cope with diverse agendas and exigencies.
32. Both the Abuja Treaty and the Constitutive Act of the African Union Commission recognizes regional economic communities as the pillars of African integration. Despite the remarkable achievements of the RECs, more needs to be done before African leaders can realize their dream of an African economic community. One of the main obstacles to Africa’s integration agenda is the need to rationalize the RECs. There are several reasons why the RECs would have to rationalized, including the following:
33. Multiple memberships by member states: On average, 95 per cent of the member states of a given REC belong to another REC (ARIA 2, UNECA, 2006). Most policy makers and their advisers at the country level indicate that multiple and overlapping memberships stretch a country’s limited resources for regional integration and lead to limited implementation of REC programmes.
34. Duplication of mandates and programmes at the REC level: There is at the moment considerable duplication of the mandates and programmes of the RECs, thus contributing to inefficiencies in the African regional integration agenda. These overlaps and duplication of programmes and activities can be found in the areas of trade, monetary and financial issues and infrastructure. Without coordination of such efforts, it is unlikely that the RECs as currently working would be able to play an effective role in moving towards continental integration.
35. Rationalization of the RECs needs to be seen in the context of the ultimate objective of the Abuja Treaty, which is to establish an African economic community. Based on resolution CM/464 of the 26th OAU Council of Ministers, the Abuja Treaty breaks the continent into five regional communities: Northern Africa, Western Africa, Central Africa, Eastern Africa and Southern Africa.
RECs are expected to be the pillars on which continental integration is to be achieved and therefore would have to work in harmony. REC rationalization therefore means addressing the splintering of the regional spaces, overlapping of institutions, duplication of efforts, resource dispersion and the existence of multiple treaties of the RECs and intergovernmental organizations.
36. The main benefit of full rationalization is that the regional economic communities would be strengthened, as overlapping functio ns of intergovernmental organizations are eliminated. In addition, multiple memberships in regional economic communities would be eliminated, resulting in a targeted use of resources for the continent’s integration process. There are other potential economic and non- economic gains from strengthened regional economic communities, including:
• Increased trade between member countries and those outside the region: Larger trading blocs would provide bigger trading opportunities; larger markets would provide an environment to nurture and improve competitiveness;
• Economies of scale: Some of the RECs formed from the small African countries are too small themselves to generate the large economies of scale needed for efficiency improvements. Rationalized RECs could eliminate this disadvantage by pooling resources or combining markets;
• Productivity improvements: Rationalized RECs increase the intensity of competition among firms, resulting in the elimination of internal inefficiencies. Given the direct correlation between increased efficiencies and redundancies occasioned by possible bankruptcies, workers’ productivity is bound to rise, leading to overall productivity gains in the subregions and the continent as a whole;
• Policy credibility: Rationalized RECs covering larger markets will have the advantage of policy lock-in, because “anti-investment” policies or fiscal laxity would become costly due to competition for investment locations. Rationalization will also increase the credibility of promises of good policies;
• Reduced regional conflicts: Rationalized RECs covering many countries would likely increase the cost of conflicts between neighbouring countries. There will be increased incentives for peaceful resolution of conflicts within a socially and economically integrated region.
37. It is important for the rationalization process that is ultimately adopted by the leader of the African Union to be more inclusive. The process would be strengthened if it is embraced by all stakeholders of the integration process, including civil society, the private sector and other development partners. To that end, the rationalization process must be realistic and reflect the concerns of the citizens and all participants in the process.
2.4 Malawi’s membership in COMESA and SADC
38. Economic literature shows that regional integration can contribute to economic growth through increased economies of scales, technological spillovers, sound macroeconomic policy and good governance. It is generally observed that through international trade a country can import technology and knowledge developed abroad. Foreign direct investments (FDIs) contribute to the transfer of technology and knowledge across borders.
39. Malawi, like many other African countries, is participating in regional economic communities in order to achieve sustainable economic development. It is a founding member of COMESA and SADC. Along with Malawi, seven other countries (see figure 1) also belong to both RECs. While multiple membership has its potential advantages with respect to attracting FDIs and expanded trade activities, it could also give rise to conflicting obligations from competing trade regimes and regulations and increase membership costs. This situation is likely to be further compounded when the free trade area and customs union come into effect and Malawi, like other countries belonging to multiple regional trading agreements (RTAs), is forced to choose its preferential trading partners.
40. While the choice of regional affiliation tends to be based on preferential trade agreements and preferred trading partners, it should also be based on sound economic and non-trade considerations.
FIG 1: Overlapping Membership in COMESA and SADC
Burundi
Comoros Djibouti
Egypt Botswana
Eritrea Lesotho
Ethiopia Mozambique
Kenya Namibia
Libya South Africa
Rwanda Tanzania
Seychelles Sudan Uganda
Angola?
DR Congo Madagascar Malawi Mauritius Swaziland Zambia Zimbabwe COMESA
SADC
PART 3: DEFINING THE NATURE AND SCOPE OF THE STUDY
The study benefited from feedback obtained from consultations with stakeholde rs and the recent study highlighting policy choices available to the Government of Malawi.
3.1 Consultations with key stakeholders in Malawi
41. In preparation for the study, ECA undertook a mission to Malawi, specifically to Lilongwe and Blantyre, to discuss with senior government officials and representatives of the private sector about the nature and scope of the study. At the end of the series of meetings, the mission summarized the discussions as follows (the full mission report is attached as an annex):
• Trade: Some of the stakeholders were of the view that Malawi could leave SADC for COMESA, but remain a signatory to selected protocols of SADC that are of interest to the country, such as the infrastructure protocol. This view, which is not backed by hard evidence, was based on the belief that the large market of COMESA offers Malawi greater potential for the future in terms of expanded of trade. However, this view is at variance with recent data that show that Malawi’s trade in COMESA is on the decline, while its trade in SADC is on the rise. A broader view held by most stakeholders in Malawi is for COMESA and SADC to agree to some form of Free Trade Area (FTA) Agreement, under which they would synchronize their trade and financial reforms, assuming that a merger between the two organizations is not possible. This would allow countries like Malawi to continue to benefit from both COMESA and SADC programmes.
• Infrastructure: Most of the officials consulted feel that Malawi is better off in SADC, which has better programmes than COMESA. They argue that the corridors used by Malawi are generally in SADC. Once the Shire-Zambezi Waterways Project is completed, transport costs are expected to drop by 60 per cent, which would make Malawi very competitive. Through the Southern Africa Power Pool (SAPP) programmes, Malawi stands to gain the most in SADC, as it offers potential avenues for the export of its electricity supply.
• Historical, cultural and ethnic reasons: It was also indicated that, for geographical, historical and cultural reasons, Malawi has greater affiliations with SADC than with COMESA, because there are large populations of Malawian origin living in the neighbouring countries, particularly in Mozambique, Tanzania, South Africa, Zambia and Zimbabwe. These countries share common languages and cultures, which makes their bonds much stronger than in COMESA.
• Political: It was noted that it would be extremely difficult for Malawi to pull out of SADC, given that it was a founding member and has stronger ties with most of the member states of SADC than those of COMESA. In addition, from the foreign policy point of view, opting out of SADC could prove extremely difficult. Nonetheless, pulling out of COMESA could also pose problems for Malawi, which the study will try to identify.
• Investment: The Mission was informed that South Africa is the main source of FDI to Malawi. Consequently, Malawi’s investment potential lies in the SADC region. However, there are concerns about South Africa’s dominance in the region and therefore other FDIs are needed from other countries to balance out South Africa’s influence.
• Macroeconomic and financial considerations. It was argued that these would not have a significant bearing on where Malawi ends up. However, it was pointed out that COMESA has macroeconomic convergence criteria for its member states, which SADC is currently also developing. It was also noted that there are South African Banks in the country that are supporting businesses. The officials pointed out that Mala wi needs a stable and sustainable macroeconomic environment to strengthen its integration agenda as well as attract sound investment.
42. The conclusions from this consultation were useful in shaping the nature and scope of the study as well as the critical areas it needs to address in providing direction about Malawi’s membership.
3.2 Review of a recent study on the issue (the TRALAC Report)
43. In February 2006, at the request of Malawi’s Ministry of Trade and Private Sector Development (MTPSD), the Trade Law Centre for Southern Africa (TRALAC) prepared a study on the same subject addressed in this report. The objective of the TRALAC study is to highlight the advantages and disadvantages of Malawi’s membership in COMESA and SADC. The ultimate goal of the study is to recommend which regional economic community best serves Malawi’s national interests, should SADC and COMESA independently enter into a customs union.1
44. Based on Malawi’s trade flows and interviews with stakeholders in Malawi, notably the private sector, the authors of the study make two observations. First they note that the COMESA region is a significant potential market for Malawi’s traditional exports, particularly to Egypt, Kenya, Zambia, Zimbabwe and Uganda. Malawi’s exports to the SADC zone are also substantial, with South Africa accounting for the lion’s share, due to a non-reciprocal bilateral trade agreement with South Africa as well as the “temporary” derogation granted to Malawi and other least developed members from a restrictive SADC rules of origin regime (the MMTZ arrangement) on textiles and clothing.
45. The second observation the study makes is that the source of Malawi’s imports is the SADC region, notably South Africa. Hence, most of Malawi’s revenue from import tariffs comes from imports from South Africa. This means that the implementation of the SADC customs union would have a negative impact on Malawi’s revenue and consequently its expenditure.
46. From these two observations, the study indicates that Malawi’s choice of a customs union should take into consideration the country’s industrial development agenda. From this perspective,
1 Other studies preceded the TRALAC study, notably field interviews with relevant stakeholders undertaken in Malawi in November 2005, the Malawi Poverty Reduction Strategy (MRPS) and the Malawi Economic Growth Strategy (MEGS), the Imani-Capricorn Stu dy (which reviewed the strengths and weaknesses of Malawi’s regional trade agreements), and the Diagnostic Trade Integration Study.
the study recommends to Malawi to choose from three options.
47. The first option is the Limited Status Quo. Under this option, Malawi would limit its regional trade integration agenda to both COMESA and SADC FTAs2 and would not join either the SADC or the COMESA customs unions. However, it would have to aggressively follow a trade facilitation agenda with a view to liberalizing and harmonizing rules of origin regimes and eliminating other non- tariff barriers (NTBs) to trade.
48. The second option is that of Differentiated Tracks. This option suggests that Malawi follow only the COMESA trade agenda and opt out of the SADC Trade Protocol. Malawi would, however, continue to participate in other complementary non-trade SADC programmes and protocols, such as infrastructure development, macroeconomic convergence, and matters related to geo-political and security interests. In addition, Malawi could choose to establis h a bilateral trade agenda with strategic SADC partners, in line with the relevant articles under the COMESA Treaty.
49. The third option is the Status Quo. This option suggests that Malawi remain in both COMESA and SADC FTAs and participate in processes leading to the customs union negotiations, knowing fully that it would in the end choose only one customs union. According to the authors of the study, this option has the advantage of allowing Malawi to choose either the COMESA or the SADC customs union at a future date.
50. The TRALAC study focused on the trade aspects of Malawi’s involvement in the continent’s regional integration agenda. However, regional integration is more than trade agreements. It is therefore important that Malawi’s decision to belong to COMESA or SADC be based not only on trade considerations, but also on the net benefits that Malawi would derive from other non-trade programmes of either COMESA or SADC.
51. Even if Malawi has to make a decision based on its trade flows, the recommended options proposed by TRALAC may not be appropriate. The Limited Status Quo option would not help speed up the continental regional integration agenda, particularly the creation of the African Economic Community (AEC). This is because the option calls for Malawi to remain at the FTA status in both RECs and not join the customs union of either SADC or COMESA. It also does not solve Malawi’s dilemma of choosing between the two RECs so as to remove the inefficiencies and duplications associated with multiple membership in regional integration groupings.
52. The Differentiated Tracks option requires Malawi to continue its membership in both RECs but pursue its trade agenda in COMESA and non-trade agenda in SADC. It therefore does not address the resource costs, inefficiencies and duplication of effort attendant with membership in the two RECs. Also, it is unclear whether this arrangement would be agreeable to the two RECs.
53. The Status Quo option is not an option, since it does not address Malawi’s challenge of belonging to two RECs. Overall, the options proposed by TRALAC may not assist Malawi in deciding on its future path, particularly in the pursuit of a broader continental regional integration vision. Ultimately, Malawi’s final decision should rest on its developmental interests, taking into account the net gains that it would derive from SADC or COMESA as well as the progress made in the African Union’s commitment to create the African Economic Community.
2 Note that a country can belong to more than one free trade area but only to one customs union.
PART 4: ANALYSIS, FINDINGS AND RECOMMENDATIONS
54. In order to assess the net benefit Malawi derives from either SADC or COMESA, the analysis would cover the following areas of regional integration: trade; monetary and financial integration; macroeconomic convergence; infrastructure; and political and cultural imp lications.
4.1 Trade
55. The formation of regional integration blocs generally involves reducing barriers to trade (such as tariffs) among member countries. Thus, the first benefit a country derives from membership in a regional integration arrangement is freer trade. Economic theory predicts that free trade improves the welfare of nations by enabling their citizens to procure goods and services from the cheapest source, leading to the reallocation of resources based on comparative advantage. Freer trade also removes obstacles to stronger sales abroad, thus allowing for economies of scale in production.
56. However, regional integration arrangements do not always generate such welfare gains. To the extent that they involve preferential reductions in trade barriers, regional integration arrangements could result in trade creation or trade diversion. Trade creation—the displacement of higher-cost domestic production (supply) by lower-cost production from partner countries due to reduced barriers within regional integration arrangements—increases welfare. But trade diversion—the displacement of lower-cost production from non-members by higher-cost production from partner countries due to reduced barriers within regional integration arrangements—reduces welfare. Thus, regional integration arrangements generate welfare gains if trade creation dominates trade diversion, an outcome that cannot be determined a priori.
57. Regional integration arrangements could reduce government revenues from tariffs, both directly through tariff cuts among members and indirectly through a shift away from imports from non- members subject to tariffs. The cost of this loss depends on how easily members can switch to alternative means of raising funds, but can be quite high in African countries that rely on tariff revenues.
58. Does Malawi’s membership in COMESA and SADC improve its welfare? This is the question that the study purports to answer, using the latest trade tools to assess Malawi's trade patterns in both COMESA and SADC.
Malawi’s trade and financial flow patterns with COMESA and SADC
59. Malawi depends on a single commodity, tobacco, for more than 60 per cent of its export earnings. Given its small domestic market, regional and international trade plays an important role in its strategy to stimulate growth and alleviate poverty. In the past, a large proportion of Malawi’s trade was with developed countries, especially the United Kingdom, Germany, the Netherlands, the United States of America and Japan. However, over the years, the importance of regional markets, both as destination for the country’s exports and source of imports has increased over the years.
Furthermore, regional relationships are important not only in determining trade with regional partners, but also because of the importance of transit corridors in neighbouring countries for both the exports and imports of landlocked-Malawi. Malawi has accordingly acknowledged the importance of the regional dimension and, therefore, concluded a number of trade agreements with countries in the region.
Malawi’s trade patterns
60. As the discussion so far indicates, the choice facing Malawi with regards to its decision of choosing between the two RECs (COMESA or SADC) is a multi-faceted one. Trade is only one of the factors that would inform this choice, as other economic, political and social factors must be taken into consideration. However, from a trade perspective, it is important to fully understand Malawi’s trade patterns. This section therefore explores Malawi’s trade flows, trade by partners and by products, the evolution of this trade and regional trade in general.
61. The trade analysis section uses recent-six-years (2000-2006) trade data from the COMTRADE3 database to examine Malawi’s trade (imports and exports).
Source: COMTRADE, UNECA 2007.
62. The graph above presents the performance of Malawi imports and exports with the world as a whole, over the past ten years. It is worth noting that the trade deficit of Malawi deteriorated from 1999 to 2005. While exports stagnated at around $US 500 million per year, imports shot to $US 1.1 billion in 2005, roughly twice the level of exports. While a sharp increase in imports is not necessarily a bad thing, especially if the imports are driven by developments in the economy contributing to the country’s modernization, it is worrying to observe that exports stagnated throughout the period and are not catching up. This could also be a reflection of deteriorating terms of trade due to lack of diversification, among other things.
Composition of Malawi’s exports and their performance
3 COMTRADE is a database run by the United Nations Secretariat. It is available from the WITS SMART website, http://wits.worldbank.org/.
Malawi's trade flow and trade balance with World 1999-2005, in million US$
-1 000,0 -500,0 0,0 500,0 1 000,0 1 500,0
1999 2000 2001 2002 2003 2004 2005
Exports US$ million Imports US$ million Trade Balance US$ million
Exports by products
63. Table 1 shows that tobacco, tea, sugar and cotton account for three quarters of Malawi’s exports. The table also indicates that, between 2000 and 2005, exports to the rest of the world as a whole grew yearly by 7 per cent on average.
Table 1: Malawi’s top 15 exports (HS4 categories) in million $US
Rank HS-4 Product Name
Average exports over period
Share in total exports in
(%)
Evaluation over the period in (%)
Yearly average change
1 2401 Unmanufactured tobacco; tobacco refuse 239.0 53.9 17.7 4.7
2 170` Cane or beet sugar and chemically pure sucrose in
solid form 60.5 13.6 24.4 33.8
3 902 Tea, whether or not flavoured 40.6 9.1 23.0 5.3
4 6203 Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts
9.3 2.1 275.4 62.2
5 5201 Cotton, not carded or combed 9.3 2.1 133.9 48.2
6 802 Other nuts, fresh or dried, whether or not shelled
or peeled 6.3 1.4 204.0 25.7
7 6205 Men's or boys' shirts 4.9 1.1 56.3 34.5
8 1005 Maize (corn) 4.7 1.1 -95.8 674.0
9 713 Dried leguminous vegetables, shelled, whether or
not skinned or split 4.3 1.0 -42.5 -1.9
10 901 Coffee, whether or not roasted or decaffeinated;
coffee husks and skins; coffee substitutes c ontaining coffee in any proportion
4.0 0.9 -47.7 -3.8
11 6105 Men's or boys' shirts, knitted or crocheted. 3.9 0.9 548.5 60.0
12 6109 T -shirts, singlets and other vests, knitted or
crocheted 3.2 0.7 42.1 10.2
13 4907 Unused postage, revenue or similar stamps of current or new issue in the country to which they are destined; stamp-impressed paper; banknotes;
cheque forms; stock, share or bond certificates and similar documents of title
2.9 0.6 1088.0 57.7
14 6204 Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts
2.3 0.5 92.6 129.2
15 4001 Natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums, in primary forms or in plates, sheets or strip,
2.3 0.5 75.0 22.8
Total All 443.8 100.0 30.6 7.0
Source: COMTRADE, 2007.
64. Overall, analysis of Malawi’s trade shows that the structure and composition of the country’s exports fall under three broad categories:
i) Non-dynamic agricultural export products: tobacco, tea, dried leguminous, and coffee. All of these products account for almost two thirds of Malawi’s total exports, with tobacco taking the lion’s share at 53.9 per cent of total exports. Over the period, exports of these products recorded below–average growth. These products are unprocessed, and therefore incorporate little added value. They do not contribute much to Malawi’s industrialization strategy.
ii) Dynamic agricultural export products: sugar, cotton, other nuts, maize and rubber. As shown in table 1, these products experienced a higher-than-average growth rate (33.8 per cent for sugar and 48.2 per cent for cotton), but also turned in erratic performances over the years, probably owing to weather vagaries (cotton, maize) and the level of domestic consumption (maize, sugar).
iii) Textile products: Malawi’s textile industry has benefited from preferential schemes and in particular the AGOA and the non-reciprocal trade agreement with South Africa. Exports of textile products, though marginal in comparison to traditional exports (less than 5 per cent of total exports), were much more dynamic than the average over the period.
However, their performance has also been erratic and probably marred by fears of erosion of preference margins. There is certainly concern over the ability of Malawi’s small textile sector to adapt to the long-term effects of the elimination of the multi-fibre arrangements.
65. In the light of the above and taking into consideration the country’s objective of spurring its exports, attention should be given to strengthening traditional exports as well as supporting non- traditional exports such as textiles. Regional integration can contribute to these objectives through the creation or development of alternative markets.
66. Beyond regional integration, it is also interesting to consider some of the current trends that may affect Malawi’s export interests. First, the current rise in interest for bio -fuels has led to a sharp increase in the prices of underlying commodities such as sugar and maize for bio-ethanol, and vegetable oil and oil seeds for bio-diesel (FAO, 2006). For Malawi, this may produce two diverging effects. Firstly, exporters and farmers producing a surplus of commodities such as maize or sugar may benefit from these price surges, provided that they can reach export markets and that they can extend their production in the future. For consumers, however, the increase in the price of staples such as maize will be hurtful. The final result for Malawi is hard to predict, but for a country with 80 per cent of rural population, the overall effects could be positive, given that higher incomes will compensate for the increase in staple food prices.
67. The positive effects of the current interest for biofuels will, however, be undermine d by the gradual reduction of the benefits of traditional protocols, in particular that of sugar. The changes in the ACP sugar protocols could jeopardize sugar exports from Malawi to the EU, as the degree of preferential treatment for ACP sugar would be reduced. In this context, Malawian sugar producers will have to find alternative markets. This could increase the importance of COMESA and SADC as alternative destinations.
68. In the medium-term, South Africa is the African country that appears best placed to invest heavily in bio-fuels, due to the size of its economy and its dependence on imported oil for transport.
But Malawi should also start considering the possibilities of developing its own bio -fuels industry, given its competitive ability to produce the raw ingredients to support such an industry. However, it should also be noted that population of COMESA is much greater than that of SADC and thus COMESA could in the longer term be a larger market for sugar –and other basic food products- for Malawi’s exporters.
Main export markets
69. Countries such as Malawi have traditionally been faced with the problem of over- concentration of exports, with three products (HS-6) accounting for more than three quarters of their total export revenues. This leaves them in a vulnerable position with regards to downturns in international prices in these three goods, or to a sudden surge in competition. Malawi’s vulnerability is exacerbated by the high degree of the geographical concentration of its exports. In this sub-section, the question of the main destination of Malawi’s exports is considered.
70. Table 2 below shows the main destinations of Malawi’s exports over the period 2000-2005 as well as each destination’s share of total exports.
Table 2: Malawi main exports destination 2000-2005 average, $US million Partner Name Average exports
2000/2005 ($US million)
Share of total in (%)
Cumulated share in (%)
Growth over the period in (%)
Yearly average growth rate in (%)
EU-27 156.4 35.20 35.20 25.2 5.7
South Africa 60.7 13.70 48.90 174.2 23.7
United States 57.7 13.00 61.90 21.9 5.7
Egypt 24 5.40 67.30 18.6 38.1
Switzerland 21 4.70 72.10 38.3 19.0
Kenya 18 4.00 76.10 -35.4 90.0
Japan 17.8 4.00 80.10 -69.2 -10.9
Mozambique 14 3.10 83.30 74.6 37.5
Zimbabwe 7.9 1.80 85.10 60.2 11.5
Zambia 6.6 1.50 86.50 -20.8 15.6
Tanzania 4.4 1.00 87.50 -39.4 102.4
Other (less than 1% of total)
55.3 12.50 100.00
- -
World 443.8 100.00 - 30.6 7.0
Source: COMTRADE, 2007.
71. Clearly, the EU still accounts for slightly over one-third of Malawi’s total exports. South Africa ranks second with $US 60 million worth of exports and the USA third with $US 57 million of exports, on average, between 2000 and 2005. Several COMESA and SADC partners come next in order of importance. The eleven countries shown in the table above together account for more than 87 per cent of Malawi’s total exports.
72. The last two columns of the table highlight the evolution of exports to the selected countries.
From 2000 to 2005, Malawi’s exports to the world increased by 30 per cent, an average rise of 7 per cent a year. Several groups of countries can be distinguished:
- Malawi’s exports to Japan, Zambia, Kenya and Tanzania decreased between 2000 and 2005;
22 - Exports to the EU, USA, Egypt and Switzerla nd grew more or less in line with world
average;
- Exports to other regional partners increased sharply over the period, with South Africa growing at 174 per cent, Mozambique at 74 per cent and Zimbabwe at 60 per cent.
Malawi’s export performance to SADC and COMESA
73. The graph below indicates that exports to SADC have increased sharply since 2000. The same graph also shows that there is more variability of exports to COMESA than to SADC. This is largely due to the high levels of tobacco exports to Egypt in 2001. Likewise, Malawi’s exports of raw sugar to Kenya did well in 2001 and even more so in 2003 and 2004 before tumbling in 2005.
While this may highlight the great vulnerability of Malawi’s exports to COMESA, it is also important to bear in mind that Kenya, applies quota safeguards of quotas on sugar exports, whose derogation within COMESA FTA is expected to expire in January 2008. This then means that there is room for more sugar exports if Kenya loses the benefits of the sugar quotas. However, the vulnerability of Malawi’s exports to COMESA is further confirmed by the number of tariff lines at the HS-6 level4. While Malawi exported to SADC an average of 969 product categories as identified at the six-digit level of the Harmonized System (HS-6) over the period 2000/2005, it only exported 510 product categories to COMESA5. There is therefore a greater diversity of exports to SADC than to COMESA.
Evolution of export to COMESA and SADC, US$ million
0 20 40 60 80 100 120 140
2 0 0 0 2001 2002 2003 2004 2 0 0 5
SADC COMESA
Distribution of exports within SADC and COMESA
74. The graph below shows the distribution of Malawi’s exports to SADC. It shows that 75 per cent of Malawi’s exports go to South Africa, followed distantly by Mozambique (17 per cent) and Tanzania (5 per cent).
4 The Harmonized System is an international classification of products. The six-digits level is hig hly disaggregated (there are approximately 5,400 such lines)
5 COMTRADE, 2007.
Distribution of exports in SADC (including South Africa), average 2000/2005
17%
5% 2%1%0%0%
South Africa Mozambiqu e Tanzani a Botswan a Lesoth o Swaziland
75. Two countries, Egypt (42 per cent) and Kenya (31 per cent), account for nearly three quarters of Malawi’s exports to COMESA. They are followed by Zimbabwe (13 per cent) and Zambia (11 per cent), which account for nearly another quarter of the exports to COMESA.
Source: COMTRADE, 2007.
Product composition of Malawi’s exports to SADC and COMESA6
76. In both COMESA and SADC, tobacco, sugar and tea largely dominate Malawi’s export basket in that order. However, Malawi’s export mix to COMESA is much more concentrated as highlighted in the table below. The 10 most exported products at the HS-4 level represent 87.8 per cent of total exports to COMESA.
Table 3: Average export mix to COMESA, $US million. 2000-2005
HS-4 Product name
Average export over 2000/2005 in
million
Share in
$US total exports in
(%)
Cumulated share in total exports in (%)
2401 Unmanufactured tobacco; tobacco refuse 24.66 42.0 42.0
1701 Cane or beet sugar and chemically pure sucrose in solid form
14.73 25.1 67.1
0902 Tea, whether or not flavoured 4.84 8.2 75.3
1005 Maize (corn) 2.16 3.7 79.0
1208 Flours and meals of oil seeds or oleaginous fruits, other than those of mustard
1.76 3.0 82.0
4001 Natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums
1.03 1.8 83.8
6 The breakdown of exports to the EU is annexed.
Malawi's export repartition within COMESA (EPA configuration, average 2000/2005)
42%
31%
13%
11% 2%1%0%0%0%0%0%0%0%0%0%0%
Egypt, Arab Rep.
Kenya Zimbabwe Zambia Madagascar Burundi Uganda Mauritius Rwanda Congo, Dem. Rep.
Ethiopia(excludes Eritrea) Comoros
Seychelles Djibouti Sudan Libya
5201 Cotton, not carded or combed 0.69 1.2 84.9
1006 Rice 0.65 1.1 86.0
3401
Soap, organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes
0.54 0.9 87.0
4819
Cartons, boxes, cases, bags and other packing containers of paper, paperboard, cellulose wadding or webs of cellulose fibres
0.51 0.9 87.8
Source: COMTRADE, 2007.
77. On the other hand, exports to SADC are less concentrated and include more industrial products (especially textiles). The top 10 exports to SADC only account for 68.2 per cent of Malawi’s exports.
Table 4: Average export mix to SADC, 2000-2005, $US million
HS-4 Product name
Average yearly export
in million
Share in $US total exports in
(%)
Cumulated share in
(%)
2401 Unmanufactured tobacco; tobacco refuse 12.1 14.9 14.9
1701 Cane or beet suga r and chemically pure sucrose in solid
form. 10.5 12.9 27.9
0902 Tea, whether or not flavoured 9.9 12.2 40.1
5201 Cotton, not carded or combed 6.0 7.3 47.4
6203 Men's or boys' suits, ensembles, jackets, blazers, trousers 5.3 6.5 53.9
6205 Men's or boy s' shirts 2.9 3.6 57.4
4907 Unused postage, revenue or similar stamps of current or
new issue in the country to which they are destined 2.8 3.4 60.8
1005 Maize (corn) 2.3 2.8 63.7
6109 T-shirts, singlets and other vests, knitted or crocheted. 2.0 2.5 66.2
6105 Men's or boys' shirts, knitted or crocheted 1.7 2.1 68.2
78. The concentration of Malawi’s exports to COMESA countries translates into a high degree of vulnerability for these exports. The economy could be easily affected by international terms of trade shocks emanating from price fluctuations for these products. Sudden surges in competition from other producers, changes in policies or changes in customer taste in partner countries could also hit Malawi’s trade performance with COMESA. This is highlighted by the volatile nature of Malawi’s exports to COMESA countries.
79. On the other hand, exports to SADC are more dynamic and somewhat more diversified, although not immune to concentration risks. The fact that exports to SADC also include some industrial products and other non-traditional exports seems to confirm the superiority of SADC over COMESA as an export destination in keeping with Malawi’s goals of diversification, industrialization and becoming an exporting country.
Analysing Malawi’s imports flow
80. The analysis so far has shown that while Malawi’s export performance has been rather erratic, the country’s imports have grown steadily over the period, leading to a widening trade deficit. In just six years, Malawi’s imports grew by 119 per cent or on average by 17.2 per cent annually (COMTRADE, 2007).
Malawi imports by source
81. As with its exports, Malawi’s imports are also characterized by a high degree of geographical concentration. Almost three quarters of Malawi’s imports originate from SADC, the EU and COMESA, as evidenced in table 5. High geographical concentration of imports tends to lead to dependence on the import source. However, given the global specialization in the value chain, import source concentration is not entirely a negative thing. But it can be a source of external shock through currency movements, which can easily expose a small economy such as that of Malawi.
Table 5: Top 10 sources of imports for Malawi
Partner Name
Yearly average imports 2000-05, in
$US million
Share in total Malawi imports in (%)
Cumulated share in (%)
Total growth (2000-2005)
in (%)
Total SADC 375.3 48.2 48.2 136.5
EU - 27 113.0 14.5 62.8 61.8
Total COMESA 89.2 11.5 74.2 267.3
India 39.1 5.0 79.3 114.0
Japan 24.9 3.2 82.5 -44.0
United States 24.1 3.1 85.6 203.0
China 20.0 2.6 88.1 149.4
United Arab Emirates 14.5 1.9 90.0 752.4
Taiwan 12.7 1.6 91.6 56.7
Saudi Arabia 9.9 1.3 92.9 85.9
World 778.0 100.0 100.0 119.0
Source: COMESA, 2007.
82. Between 2000 and 2005, imports from COMESA grew stronger than those from SADC.
This could be attributed to the formation of the COMESA Free Trade Area in October 2000.
Imports from COMESA marginally overtook those of the EU in 2005.
Imports by products
83. Malawi imports a large mix of products, the degree of concentration of imports being much lower than that of exports. The top 15 imports of Malawi only account for 43.7 per cent of total imports. Table 6 below presents the 15 most imported products into Malawi (HS-4). Petroleum products (oil) account for the largest imported product category, with an average of $US 91 million.
The table presents some evidence indicating that Malawi has become a regional hub for unprocessed tobacco. Malawi’s imports of tobacco have skyrocketed in the period (+943 per cent). Most of the
