Malawi Government is advocating for further trade harmonisation and simplified customs procedures to enable the private sector trade to easily across borders, Ministry of Industry and Trade has said.
Responding to a questionnaire on Friday, in the wake of a Tripartite Free Trade Area (TFTA) negotiations that took place in Kigali, Rwanda, Ministry of Industry and Trade spokesperson Wiskes Nkombezi said Malawi supports the grand free trade area because of the numerous benefits associated with it.
“Malawi will benefit from increased investment flows into the region. The oncoming trade bloc will solve the problem of dual membership that many countries, including Malawi ,currently face. Malawi is a member of both the Common Market for Eastern and Southern Africa (Comesa) and the Southern Africa Development Community (Sadc).
“This means there are financial obligations, particularly annual contributions to both blocs. Differences in certain procedures and instruments among these blocs also pose a challenge to businesspeople. Malawi will also benefit from the infrastructure and industrial development programmes which are lined up for implementation,” said Nkombezi.
However, a trade expert, Victor Mponda-Banda, in an e-mail on Sunday said what is critical in the forthcoming TFTA is Malawi’s policy preparedness and ability to identify important sectors.
“In a free trade area, the most efficient producers replace the inefficient, therefore, we need to identify strategic industries that have the potential to be efficient in the TFTA. There is need to deliberately position our industrialisation policy to respond to the grand trade bloc. Currently, our export basket is largely agricultural raw products and semi-processed to a certain extent. Government must intervene to increase output, efficiency and competitiveness. The TFTA will certainly bring enormous opportunities but we need to be careful because it will also bring negative effects if we take a laid-back approach. Therefore, deliberate and informed interventions need to come into play such as targeted subsidies and tax measures aimed specifically at industrialisation,” said Mponda-Banda.
As a precursor to the tripartite trade negotiations, technical working group meetings were held on rules of origin, custom cooperation, documentation, procedures and transit instruments.
Sadc, East African Community (EAC) and Comesa have since 2008 been negotiating a road map to merge into a free trade area covering more than 600 million people and a gross domestic product (GDP) of about $1 trillion.
Spanning from Libya and Egypt through East Africa down to Angola and South Africa, the TFTA will solve the problem often described as a “spaghetti bowl” effect of multiple regional economic communities that have mushroomed in Africa.
The TFTA 26 membership makes up almost half of the African Union (AU) in terms of membership and 57 percent of Africa’s population and over 58 percent in terms of contribution to Africa’s GDP.
The TFTA will also increase the size of the region as an investment area which will attract more foreign direct investment (FDI) as investors prefer large markets for their goods.
Apparently, the grand TFTA will help Malawi get out of the problem of dual membership which is a great step for economic players. Thus, the oncoming free trade area will simplify the present complicated trading regimes, which also includes bilateral trade agreements.
The envisaged economic bloc will also help boost intra-African trade which is one of the lowest among all continents in the world.
Experts have so far noted that a reduction of tariff and non-tariff barriers is also good for the competitiveness of land-locked Malawi.
However, the greatest potential lies in luring investors into Malawi because among the important determinants for FDI inflows are market size and levels of income of a particular economy. Therefore, an investor will have to look at the grand TFTA market rather than Malawi market only.
It has been argued that we need to be aggressive in luring the investors by improving the doing business procedures and the general investment climate for big investors.