Transcript SAFETY NETS PROGRAMS

Malawi Competition Regime
• 7UP3 project will be undertaken by the Centre for
Social Research (CSR) – a research arm of the
faculty of social science in the University of
Malawi
• CSR is enthused to be part of this regional project
because it is in line with its mandate and strategic
plan
• So far, there has been little work done in this area.
This project gives CSR a chance to add a new
dimension to its profile
• Some groundbreaking work on the PCP areas was
done by CAMA and CUTS. The work was published
by CUTS in 2003 under the title “Spine Chilling
Experiences of Anti-Competitive Practices in Malawi”
• CUTS has continued to follow events in Malawi
which enabled produce some updates on Malawi
• With my spine chilled, I was unable to match their
work in so short a period
• Their work will form the basis for the Malawi’s Study
as some attempt will be done to update some of the
areas
• The following slides provide some notes for the PCP
• Malawi became a British Protectorate in 1891, politically
independent in 1964, a republic in 1966, one party-state in 1971
• A referendum in 1993 did away with the one-party system and a
new republican constitution was adopted in 1995
• Multiparty general elections have been held three times since
then (1994, 1999 and 2004)
• Central Government dominates public administration. Low
priority is given to local government. Local Government
elections were held only once in 2000. None are in insight
• Judicial system functions fairly well and independently
especially since the new constitution although it is poorly
funded to deal with cases expeditiously
• Traditional leadership still play major roles in the Malawi in
both public and justice administration
• Economic management since SAPs has leaned more towards the
market – exposing domestic firms to fair and unfair competition
and consumers to the benefits and ills of free marketing
• Malawi is yet to gain full economic independence. She is very
poor.
• Malawi lies at the end of the Great Rift Valley and
is sandwiched between Mozambique (SE),
Tanzania (NE) and Zambia (West)
• It sits on 119 thousand sq km and accommodates a
rising population (1.9%) of just over 12m in 2005;
65% of which are classified as poor
• Agriculture is her mainstay – it accounts for over
35% of GDP and gives something to do for 80%
of the labour force
• Unemployment ‘does not exist’ on the assumption
that the unemployed have the (hard?) choice of
being self-employed as subsistence farmers
• Some more facts on the following table
Indicator
GDP Per Capita (US$)
Population in millions
Population below poverty line (%)
Population without food 4-6 months before harvest (%)
Population (rural) with chronic food insecurity (%)
Population unable to satisfy their basic calorific needs (%)
Adult literacy (%)
Male
Female
Combined primary, secondary and tertiary GER (%)
Life Expectancy at birth (years)
Population expected to live up to 40 years (% of cohort)
Infant mortality rate (number per 1,000 live births)
Under-5 mortality rate (number per 1,000 live births)
Maternal mortality rate (number per 100,000 live births)
HIV/AIDS prevalence rate (% of the 14-49 age group)
Value
170
12
65.3
50
55
40
61
75
48
72
38.5
41.4
114
183
1100
14.4
Year
2002
2005
1998
2000
2000
2000
2001
2001
2001
2000-5
2001
2001
1985-2001
2003
• The country has a weak economic structure and
requires a genuine structural transformation. This is
despite the adoption of SAPs since 1981
• In 2004, 39% of GDP was generated from
Agriculture. Manufacturing was 14% and has been
declining from a high of 18% achieved in 1995
• Distribution has filled the gap created by the
shrinking manufacturing sector. Its share has
increased from 13% up to 1994 and 22% since 1995
• GDP growth has rarely been stable
• Figures 1 and 2 depict the story visually
Figure 1: GDP Sectoral Shares Since 1980
100%
80%
60%
40%
20%
Smallscale agriculture
Largescale agriculture
Manufacturing
Distribution
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
0%
Services
-5
-10
-15
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
Per cent
Figure 2: GDP Growth since 1980
15
10
5
0
• The import-substitution policies in the years up to
1980 forced government to protect the infant and the
vulnerable consumer
• High import duties and price controls were the tools.
Competition was not encouraged and inefficiency
characterised the Malawi’s economy
• SAPs opened borders and freed markets in the quest to
promote competition, force efficiency and deliver
benefits of the consumer.
• However, no genuine competition came. What came
instead were slow death of ‘manufacturing infants’
caused by fair and dumped imports and consumer
exploitation by SAP-freed monopolies/oligopolies as
the small local market and concessions restricted entry
• Some competition has been witnessed in importscovered sectors. Privatisation has not helped either.
• As part of the reforms under SAPs, the Ministry of
Trade and Industry turned from being a regulator into
a facilitator of competition
• Further, Malawi introduced a host of competition
enhancing policies namely (i) investment promotion
(ii) integrated trade and industry (iii) micro and small
enterprise (iv) micro finance policies and ultimately
(v) competition and fair trading.
• Most of the key policies have been underlined by
legislation. The critical ones being the competition
and fair trading and the Consumer Protection Acts
• Government (GCU) and public enterprises
procurement policies also require competitive
tendering for purchases of goods and services to
promote competition among suppliers
Nature of market
• Relatively, there is competition in the consumer
goods, edible oils, soaps and household durable goods
markets. In these sectors, domestic production is
supplemented by imports
• There are certain sectors that have limited competition
like the sugar, beer and soft drinks, motor vehicle
genuine spares despite market liberalisation
• Naturally, utilities face no competition. Competition
in the distribution of utilities is still not in sight
• In some sectors like financial services and insurance
there is some market concentration although there is
some improvement especially in the retail banking
• Serious ‘investigations’ are required to understand the
continued limited competition and exploitation of the
consumer, especially in the rural areas
• Uncompetitiveness of local firms is evidenced by
the closure of manufacturing firms, shrinking
manufacturing sector and blossoming distribution
sector, in terms of their value-added
• Local firms point at ‘the deaths of their friends’
and loudly call for protection against what they
consider unfair competition.
• Dumping (and not fair imports) is blamed for local
firms’ struggles and closures
• Further, high import content of the locally
produced products make local firms uncompetitive
• Literature review or primary critical analysis is
required in this area to establish some credible
explanation
• There are no restrictive legislative barriers
• There are very few administrative barriers in some
sectors where concessions are granted to attract
investors
• There are natural barriers for foreign investors –
landlockedness, quality of human resources
especially semi-skilled, size of the economy
(poverty)
• Alleged corruption and misuse of donor funds has
not helped in the attraction of investors and donors
• Further, poor economic management fuelled
inflation and too high interest rates. There was
virtually no investment by both domestic and
foreign investors
• All these have acted as barriers to entry
• Government enacted the Competition and Fair
Trading Act in 2000
• The law has most of the necessary provisions
• The law has adequately dealt with the dominant
firm, collusions and price fixing associations,
mergers and acquisition and monopolies and
oligopolies
• Its has provided for a competition authority
• It is not as comprehensive as the competition
policy. It doesn’t deal with dumping adequately.
• What is more spine chilling is that five years have
gone without the ‘teeth of the Act’ (the
Competition Commission) with lack of planning
and resources as possible excuses
• A very good Consumer Protection Act was
enacted in 2003 and it provided for the
establishment of Consumer Protection Council
• The Council would protect consumers from a host
of unfair trading practices and seek compensation
• The law covers most of the key consumer
protection issues although local firms are not
featured as consumers.
• However, serious or more ‘holes’ could only be
uncovered during implementation.
• Unfortunately, the Council is yet to be established.
• We are hopeful that the new government, led by
former COMESA ED, will pick up the issue
Some concluding remarks
• Policies and legislation for the promotion of
competition and protecting consumers exist in
Malawi
• What are missing are the Competition
Commission and Consumer Protection Council
both of which have been provided for in the
Malawi Laws
• Lack of implementation is the biggest plague in
Malawi. Apparently competition and consumer
protection are never been priorities
• This project will try to find reasons why these two
related issues are given low priority
• This project will show that the civil society is still
interested
Thanks very much for your attention
MG Tsoka, CSR, UNIMA, Zomba, Malawi