Malawi WT/TPR/S/96
Page 11
II. TRADE AND INVESTMENT REGIMES
(1) THE INSTITUTIONAL FRAMEWORK
1. Malawi is a unitary republic with elements of both parliamentary and presidential political
systems.  It gained independence in 1964.  A new Constitution guaranteeing a multi-party democracy
as well as freedom of speech, religion, and assembly was adopted in May 1994.  It separated the
executive powers of the President from the legislative role of the unicameral Parliament and from theindependent judiciary.
1
2. Parliament comprises the National Assembly, which consists of 193 members, and the
President.  Members of Parliament, including the President, are elected by universal suffrage to serve
five-year terms.  The President is Head of State and of Government.  The Constitution limits the
President to serving two consecutive terms of office;  this limitation does not apply to NationalAssembly members.  The President appoints the Cabinet (currently comprising 36 members).  The
Office of the President and Cabinet performs the executive role.
3. The judicial system is based on English common law and traditional customary law.  The
Supreme Court of Appeal is the highest court, followed by the High Court, which is responsible
inter alia,  for interpreting the Constitution.  The Chief Ju stice is head of the Supreme Court and of the
High Court.  The President appoints judges based on the recommendations of the Judicial Service
Commission.
2  Subordinate courts consist mainly of magistrate courts.
4. Malawi comprises 27 administrative divisions, or districts.  The 1998 Local Government Act
transferred certain public-service functions to semi-autonomous District Assemblies, first elected in
November 2000, as part of the Government's move towards a more decentralized structure.  Trade-
related and other economic policies remain the Government' responsibility.
(2) TRADE POLICY FORMULATION AND IMPLEMENTATION
5. Policies, including on trade and investment, are set up by means of legislation;  at the top is
the Constitution, followed by Acts of Parliament and "subsidiary registrations" (e.g. government
regulations, orders, and guidelines).  Relevant ministers issue administrative regulations in accordance
with powers conferred to them under specific parliamentary Acts.  In general, the need for a new Act
can be expressed by any Malawian citizen.  The need is discussed by the Cabinet, and then theAttorney-General's Office drafts the related bill on the basis of instructions given by the minister
competent in the area under consideration.  Once adopted by the Cabinet, the bill is published in the
Government Gazette , generally for at least 21 days.  It is then introduced to Parliament and if passed
after three readings, it becomes law following Presidential assent and publication in the Gazette.
6. The Ministry of Commerce and Industry has overall responsibility for trade and industry
policy formulation.  It negotiates and implements Malawi's multilateral, regional, and bilateral trade
arrangements, although formal responsibility for international negotiations rests with the Ministry of
Foreign Affairs and International Cooperation.  Inter-Ministerial Committees have been established to
examine trade agreements and WTO matters.  The SADC National Working Group on Negotiations
for the Trade Protocol was established in 1997 to advise the Government and to provide a consultativepublic/private-sector forum for addressing a range of commercial factors arising from the
                                                     
1 After one-party rule, Malawi held democratic parliamentary and presidential elections in 1994 and
again in 1999.  The next parliamentary and presidential elections are to be held in 2004.
2 This consists of the Chief Justice, the chairman of the Civil Service Commission, and one judge
appointed by the President as well as various legal practitioners and magistrates.WT/TPR/S/96 Trade Policy Review
Page 12
negotiations.  In 2000, its mandate was broadened to cover the full range of trade issues, policies, and
agreements, and it was renamed the National Working Group on Trade Policy.  It is chaired by a
private-sector representative and is attended mainly by private-sector interests;  ministries and
agencies are, in principle, members.  It recently merged with another group established in 2000, the
National Working Group for SADC Trade Protocol Implementation, which was dominated by public-
sector representatives, and chaired by the Principal Secretary of the Ministry of Commerce andIndustry.  The existence of two groups, one comprising mainly private-sector representatives and the
other public-sector members, was seen to be creating confusion and undermining public/private sector
interaction.
7. The National Working Group on Trade Policy (whi ch resulted from the merger of the two
groups) advises the Government, through the Principal Secretary of Commerce and Industry, on alllegislative and policy issues relating to trade, including regulatory provisions and policy reforms.  In
addition, it provides a framework for monitoring and evaluating the implementation of Malawi’s trade
arrangements and for ensuring conformity with agreed rules.  It is also to facilitate consultation and
cooperation among private and public sector parties to promote trade.  The Group is to regularly
commission and review technical reports prepared by the National Task Force on Trade Policy.Membership comprises high level representatives from the public and private sectors as well as
academia and the donor community.
3  The Group is privately funded, including from donors.  The
Government is attempting to improve the coordination of trade policy, which, until now, has been
dispersed over several ministries, with no overriding authority.4
8. Other ministries having an important input in trade-related policies include Finance and
Economic Planning, which is responsible for th e overall budget as well as the Government's
expenditure and revenue measures, including tariff policies, and planning;  and Agriculture andIrrigation, which formulates agricultural policies, including production plans aimed at diversification,
food security, and ensuring supply of farm inputs.   The Malawi Revenue Authority, established in
February 2000 under the Ministry of Finance and Economic Planning, is responsible for tax and tariff
administration, including implementing customs pro cedures, such as applying rules of origin, and
collecting import duties.  Moreover, policy decisions of the ministries/departments responsible forcommunications, transport and public works, forestry, mines, and tourism directly affect trade.
9. The Copyright Society, under the Ministry of Sport and Culture, administers copyright
legislation to protect intellectual property rights over creative works.  Patents are the responsibility of
the Patents Office in the Ministry of Justice.  The Malawi Bureau of Standards sets and enforces
standards.  Investment promotion is handled by the Malawi Investment Promotion Agency, and export
promotion by the Malawi Export Promotion Coun cil.  The Privatisation Commission divests state-
owned enterprises selected by the Government, and the Malawi Development Corporation is in charge
of equity participation in manufacturing and service industries where private-sector resources are
insufficient.  The Agricultural Development and Marketing Corporation continues to market certain
products in isolated areas and to have major shareholdings in a number of enterprises.  The MalawiIndustrial Research and Technical Development Centre is responsible for research and technology
development.  The National Statistical Office produces a range of statistics.
                                                     
3 Ministries represented are Commerce and Industry, Finance and Economic Planning, Justice, and
Foreign Affairs and International Cooperation.  Other public-sector members are the National EconomicCouncil, the Reserve Bank, the Malawi Revenue Authority, the Malawi Investment Promotion Agency, and the
Malawi Export Promotion Council.  Private-sector representatives include the Malawi Confederation of
Chambers of Commerce and Industry, which is the Group's Secretariat, the Exporters' Association of Malawi,and the Textiles and Garments Manufacturers of Malawi.  The University of Malawi, including the Polytechnic,is also represented.
4 Page (2001) p. 12.Malawi WT/TPR/S/96
Page 13
10. The Reserve Bank of Malawi, as the central bank, is responsible for monetary and exchange
rate policies as well as prudential regulation and supervision of the financial sector.  The Reserve
Bank Act of 1989 provides it with independence in conducting monetary and exchange rate
management.  Final authority for these policies, however, rests with the Ministry of Finance and
Economic Planning.5  The Reserve Bank also advises the Government on monetary and banking
matters, and on economic policy in general.  It is also a major source of finance and economicstatistics, and produces reports and commentaries on the state of the economy.
11. Malawi has no independent statutory body to review or advise the Government on economic
and trade policies, including the provision of government assistance to industry.  Most economic
policy advice to the Government comes from the Reserve Bank, the Ministries of Finance and
Economic Planning, and Commerce and Industry,  and the publicly funded National Economic
Council.  Reporting to the President, and operati onally linked with the Ministry of Finance and
Economic Planning, the Council advises the Government and the public on economic and
development policies.  It also helps establish national development goals and plans, such as Vision
2020, and monitors their implementation.  The Council operates using a participatory approval
process whereby Technical Working Groups, comprising Council staff and technical officers fromline ministries, provide an interface between stakeholders to formulate and review policies.
6
12. The private sector (e.g. the Malawi Confederation of Commerce and Industry, and the
Garments and Textile Manufacturers Association of Malawi) is involved in trade-policy formulation
through consultations held by the Government as well as participation in the National Working Group
on Trade Policy.  Although consumers' interests are represented by the Consumer Association of
Malawi, it has no representation on the National Working Group.  The National Association of Small
and Medium Enterprises represents the interests of small-scale entrepreneurs, and the SmallEnterprise Development Organization of Malawi provides micro-finance, training, and other
assistance to small enterprises, such as through the Malawi Entrepreneurs Development Institute.
Improving consultation and coordination between the public and private sectors is seen by the
Government to be important.  Academics from the University of Malawi, including the Malawi
Polytechnic, are also members of the Group, and are periodically commissioned by the Governmentto advise on aspects of trade and other economic policies.  Two institutions affiliated with the
University – the Centre for Social Research and the Agricultural Policy Research Unit – conduct
economic research.
(3) T
RADE LAWS AND REGULATIONS
13. In Malawi, domestic legislation takes precedence over international treaties.  Since 1994,
international agreements become part of domestic law only when ratified by an Act of Parliament
(Section 211 of the Constitution).  Malawi's trade laws and regulations (e.g. on intellectual property,
anti-dumping and countervailing remedies) are being reviewed and updated to reflect trends in the
                                                     
5 The Reserve Bank's degree of independence has been questioned at times.  The President of Malawi
appoints both the Governor and Deputy Governor of the Reserve Bank for five-year terms;  reappointment ispossible.  Bank governors have changed more than five times in the last 15 years.  The Chairman of theChamber of Commerce and Industry has urged that the Reserve Bank be de-linked from the Government toavoid political interference in its operations, and that its governors and board members be appointed by, and
accountable to, Parliament inst ead of the President.  See The Chronicle Newspaper  (Lilongwe), "Reserve Bank
Must Have Greater Autonomy", Christopher Jimu, 9 July 2001.
6 The Technical Working Groups have been formed according to the coverage of the Vision 2020 Plan,
namely good governance;  population, sustainable growth, and development;  vibrant culture;  economicinfrastructure;  social-sector development;  science and technology;  fair and equitable distribution of income;food security;  and natural resources and environmental management.WT/TPR/S/96 Trade Policy Review
Page 14
multilateral trading system.  The main trade-related laws in Malawi are provided in Table II.1.  The
Competition and Fair Trading Act of 1998 became operational in April 2000.
Table II.1
Main trade-related laws
Legislation Area
The Sale of Goods Act, Cap 48:01 1967 Formation of contract and transfer of property
The Control of Goods Act, Cap 18:08 1967 Control of the distribution, disposal, purchase and sale, and price
controls
The Control of Goods (Import and Export) Act Control of exports and imports of goods
The Malawi Bureau of Standards Act, Cap 51:02 1972 Promote standardization, specifications, and provide scientific testing
and marks
The Weights and Measures Act, Cap 48:04 1960 Provide unification in weights and measures
The Metrication Act, Cap 48:08 1981 Introduce metrification commerce
The Finance and Audit Act, Cap 37:01 1976 Regulate public finances
The Business Licensing Act, Cap 46:01 Sale of goods in business
The Companies Act, Cap 46:03 1978 Formation/incorporation of firms
The Trustees Incorporation Act, Cap 51 Formation of trusts
The Industrial Licensing Act No. 28 1989 Licensing of certain manufactured products
The Business Names Reg. Act, Cap 46:2 1922 Registration of all entities in business
The Capital Markets Development Act, Cap 46:06 1989 Registration of operations on capital transactions
The Investment Promotion Act No. 287 1991 Enabling investment processes
The Public Enterprises (Privatization) Act No. 7 1996 Privatization of public services
The Banking Act No. 19 1989 Regulation of financial services
The Export Promotion Council Act, Cap 39:03 1971 Facilitation of export activities
The Export Processing Zones Act No.11, 1995 Manufacturing in export zones
The Export Incentives Act, Cap 39:04 1989 Provision of export incentives
The Exchange Control Act, Cap 45:01 1984 Allocation of foreign exchange
The Taxation Act, Cap 41:01 1964 Taxation of earnings
The Customs and Excise Act, Cap 41:02 1964 Collection of import duties
The Merchandise Act, Cap 49:04 1958 Marking goods for sale
The Registered Designs Act, Cap 49:05 1958 Registering new designs of articles
The Trade Marks Act, Cap 49:01 1958 Registration of trade marks
The Patents Act, Cap 49:02 1958 Registration of inventions
The Trade Dispute Act, Cap 54:02 Arbitration and dispute settlements
The Copyright Act Regulation of original works
The Tourism and Hotels Act Regulation/promotion of tourism
Competition and Fair Traders Act 1998 Regulate competition
Cooperative Societies Act 1998 Regulate activities of cooperatives
Source: WTO document WT/COMTD/IF/37, 18 September 1998;  and the Malawian authorities.
14. Considerable additional work is needed to align Malawi's national legislation with multilateral
requirements, including improving its implementa tion and enforcement capabilities.  Rationalizing
Malawi's trade legislation will enhance the predictability of its foreign trade regime and increase
confidence of traders and investors.  The Government sees the reform of legislation as an essential
means of establishing an enabling environment in which the private sector can expand and prosper.Malawi WT/TPR/S/96
Page 15
(4) POLICY OBJECTIVES
15. Despite some setbacks, the Government remains committed to trade and investment
liberalization as part of the long-standing recovery programme that began in the mid 1980s and
deepened in the mid 1990s.  It recognizes the increasing importance of market-opening measures in
improving competitiveness and achieving export diversification.  The need for private-sector-led
development, by redirecting resources away from the public sector, is also accepted, and privatizationefforts had accelerated until the programme’s temporary suspension in June 2001.  Malawi's trade
policy is aimed at further outward orientation and improved trade and economic performance.
16. The Government regards private, including foreig n, direct investment as an important catalyst
for growth.  It is creating an atmosphere designed to promote business confidence and attract more
private investment.  It also plans to implement sustainable management practices for its key naturalresources, such as forests, fisheries, minerals, and agricultural resources.  Sustainable development
and domestic processing are seen as important means of increasing economic self-reliance.
17. Malawi's development was guided by ten-year plans or "statements of development policies"
up to 1987, supplemented by five-year rolling Publ ic Sector Investment Programmes and Sectoral
Policy Framework Papers.  In the 1980s, the Government implemented Structural Adjustment
Programmes in which the rolling three-year Policy Framework Papers set medium-term economic
policies.
7  In 1998, the Government launched a long-ter m development plan, Vision 2020, to provide
a foundation on which to formulate, implement, and evaluate short- and medium-term policies.  It was
developed by a national core team comprising representatives from the public, private, and tertiary
sectors, as well as a working group made up of many, diverse stakeholders.  According to the Vision,
Malawi will "by 2020 be a secure, democratically mature, environmentally sustainable and self-reliant
nation, with equal opportunities for and active participation by all, having social services, vibrantcultural and religious values and a technologically driven middle-income economy."
18. Vision 2020 calls for, inter alia , the achievement of sustainable economic growth and
development mainly by doubling the relative size of the manufacturing sector to 25% of GDP, as well
as development of the mining, tourism, and agriculture sectors.  Good governance, including
transparent and accountable government, with the three branches – the executive, legislature, and thejudiciary – clearly separated, is also of high priority.  This includes the elimination of "rampant
corruption in both private and public offices and leaders".  The Government has increased its fight
against corruption by passing the Anti-Corruption Practices Act, by further strengthening the capacity
of the Anti-Corruption Bureau, formed in 1999, and using other available avenues, such as the
Auditor-General, the Office of the Ombudsman, and the Public Accounts Committee of Parliament, topress ahead on several high-profile public corruption cases.
8  The Government also intends to
expedite such fraud and corruption cases by strengthening the capacity of courts, and to eliminate
institutional and legal bottlenecks.
19. The Government's medium-term growth strategy for achieving Vision 2020 objectives is
contained in its Poverty Reduction Strategy Programme, which is aimed at alleviating poverty byidentifying policies that will promote rapid econom ic growth and ensure that the benefits are
equitably distributed.  The Poverty Reduction Strategy Programme, formulated by the Ministry of
Finance and Economic Planning, has entered its final phase, and is being consolidated to reflect
sectoral priorities.  The latest draft, of October 2001, is to be publicly discussed at a National
                                                     
7 Between 1981 and 1994, Malawi undertook six such adjustment programmes.
8 Official investigators have, for example, pursued cases of fraud, corruption, and misappropriation of
public funds identified in Auditor-General reports, such as by the Petroleum Control Commission.  Customsevasion identified by the Malawi Revenue Authority is also being legally recovered and prosecuted.WT/TPR/S/96 Trade Policy Review
Page 16
Symposium, and the final Programme is expected to be approved by Parliament in November 2001.
The Programme has four pillars.  The first pillar is to achieve sustainable pro-poor economic growth
through agricultural and rural development by improving access to farm inputs, micro-credit,
research, and extension services;  by encouraging agri-processing;  infrastructural, including
irrigation, facilities;  marketing programmes;  reducing land shortage and degradation;  as well as
restoring macroeconomic stability to generate sustainable growth by reducing inflation and loweringinterest rates.  Manufacturing is also to be strengthened and broadened.  The other pillars cover
human capital development, by ensuring that the poor receive sufficient health and education services,
including a National Health Plan (1999-2004) to address the appalling incidence of HIV/AIDS and
other diseases, such as malaria
9;  improving the quality of life for the most vulnerable, through
provision of safety nets for the poor;  and providing good governance, political will and mindset toensure that public-sector institutions protect the poor, including greater efficiency in providing
government services and budget management.  Private-sector development is seen as the key engine
of growth, generated by sectoral developments, especially in agriculture, tourism, mining, and
manufacturing.
20. Malawi's industrial development policies are embodied within an integrated trade and
industry policy released in 1998.
10  Its primary objective is to support and encourage private-sector
development by creating a conducive environment for business that will improve the competitiveness
of industry.  Trade and industry policies are designed to be complementary.  To help stimulate the
private sector, the Government is deregulating and liberalizing the economy, including price
decontrol, elimination of foreign exchange rationing  and industrial licensing, reduction of corporate
taxes, introduction of market-based instruments for managing monetary policy, trade liberalization,
enactment of the Investment Promotion Act, and development of export-processing zones.  As a
landlocked country, Malawi has taken initiatives to lower its high transportation costs, such as
opening of the Beira road route, greater utilization of the Northern Transport Corridor, and improving
the rail link to Nacala through the privatization of Malawi Railways.
21. The Government accords priority to industrial development, including greater investment
promotional efforts.  Industrial linkages within the manufacturing sector and with the rest of theeconomy are to be strengthened by optimizing the exploitation of natural resources and promoting
domestic processing and export-oriented industrialization.  Strategic industrial activities are to be
identified and promoted on the basis of their capacity to maximize economic and social benefits,
including increased involvement of Malawians.  Strengthening the capacity of small and medium
enterprises is also a high priority of the Government.  More specifically, the policy objectives guidingindustrial development include broadening the industrial base;  development of small and medium-
scale industries;  development of agri-processing, textiles, and other key sectors, such as pottery;
enhanced science and technology development to improve industrial competitiveness;  and expansion
of export-oriented industries.
22. Export promotion and diversification are to be encouraged by offering a competitive package
of export incentives and ensuring that the export-processing-zone programme is administered
efficiently.  The policy also aims to help counter the erosion of GSP and Lomé tariff preferences (due
to liberalization of trade by other countries) by promoting diversification of trading partners,
including through participation in regional trade agreements.  The Government intends to link trade
liberalization to viable industrial and export development by fully utilizing available preferential
treatment, including preferential market access.  However, long-term over-reliance on such
                                                     
9 The Government has designed a National Strategic Framework to combat HIV/AIDS, supported by
donor partners.
10 Ministry of Commerce and Industry (1998).Malawi WT/TPR/S/96
Page 17
preferences is becoming a challenging issue.11  The Government also intends to consider remedial
trade measures such as anti-dumping, countervailing, and safeguard actions.12
23. Other policy actions deemed necessary to overcome bottlenecks in Malawi's industrial
development include adequate finance and credit;  sufficient adjustment support;  promoting enlarged
markets;  and improved infrastructure (physical and human).  Many of these bottlenecks are being
addressed by a number of training and other support programmes financed by the Ministry ofCommerce and Industry in 2002.  These are aimed at diversifying the country’s export base and
promoting the growth of value-added manufacturing.
(5) T
RADE AGREEMENTS AND ARRANGEMENTS
(i) Multilateral agreements
24. Malawi officially became an original member of the WTO on 31 May 1995;  it had been a
contracting party to the GATT since 28 August 1964.  Malawi is neither a signatory nor an observer
to any of the WTO plurilateral agreements.  Malawi’s WTO notifications are summarized in
Table II.2.  Malawi has never been involved directly in a dispute under the WTO Dispute Settlement
Mechanism.
Table II.2
Selected notifications to the WTO, 31 July 2001
WTO Agreement Description of requirement PeriodicityDocument number of latest
notification
Anti-Dumping (Art. 18.5) Laws and regulations Once by March 1995, then
changesG/ADP/N/1/MWI/1/Corr.11,
19 February 1996
Import Licensing Procedures
(Art 7.3)Questionnaire;  rules and
information concerning
procedures for the submission of
applicationsAnnual for questionnaire;  rules
and information once, then
changesG/LIC/N/3/MWI/1,
6 September 1999
Import Licensing Procedures(Art. 1.4(a) and 8.2(b)Laws and regulations Once, then changes G/LIC/N/1/MWI/1,
13 October 1999
Subsidies (Art. 32) Laws and regulations Once by March 1995, then
changesG/SCM/N/1/MWI/1,
14 December 1995
Technical Barriers to Trade
(Art. 10.1 and 10.3)Enquiry points Once, and then changes G/TBT/ENQ/18,
19 March 2001
Technical barriers to Trade(Annex 3C)Acceptance of the WTO TBT
Code of Good PracticeOnce G/TBT/CS/N/63,
8 January 1997
Customs Valuation
(Arts. 20.1 and 22.1)Delay in commencement of
provisions and changes in lawsOnce on delay, then changes
onlyG/Val/N/MWI/1, 7 April 1998
G/VAL/2/Rev.12, 30 March 2001
TRIPS (Art. 69) Details of enquiry points Once, then changes IP/N/3/Rev.5,
6 July 2001
Table II.2 (cont'd)
                                                     
11 Duncan (2001).
12 Although such measures are allowed for in the multilateral trading system, over-reliance on such
actions to protect inefficient industries is likely to hurt Malawi's consumers and undermine its economicefficiency.WT/TPR/S/96 Trade Policy Review
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WTO Agreement Description of requirement PeriodicityDocument number of latest
notification
TRIMs (Art. 6.2) Details of enquiry points Once, then changes G/TRIMS/N/2/Rev.8,
19 July 2000
Sanitary and Phytosanitary
Measures (Art. 7, Annex B)Measures taken Ad hoc G/SPS/N/MWI/1,
8 January 2001
Sanitary and PhytosanitaryMeasures (Paras 3 and 10
Annex B)Details of national notification
authorities and enquiry pointOnce G/SPS/GEN/150,
6 December 1999
Sub-Committee onLeast-Developed CountriesDetails of focal points under the
Integrated FrameworkOnce WT/COMTD/LDC/W/14,
24 February 1999
Source : WTO documents.
25. As a UN-designated least-developed country, Malawi is eligible for "special and differential
treatment" provided under the WTO Agreements.  Malawi has experienced difficulties in
implementing commitments under the Agreements.  Implementation has heavily strained its limited
institutional and human resource capacities.  It therefore seeks technical assistance from other WTO
Members and international organizations to help it to meet its multilateral commitments.  It believes
that an imbalance exists in some of the WTO Agreements, including inadequate transitional periods,
and that developed countries need to implement fully the "special and differential" provisions for
developing countries, especially for least developed countries.  Malawi is also concerned about thepossible inclusion on the WTO agenda of  labour standards, which it sees as the mandate of the
International Labour Organization.  It objects to the possible use of environmental measures as trade
barriers, especially against products of least developed countries, and believes that further analytical
work is needed before ‘mainstreaming’ environment issues into the WTO.  On investment, Malawi
believes that any multilateral outcome should contribute to facilitating such flows to least developedcountries.
26. Malawi believes that any new round would need to have a developmental agenda with five
priorities (currently covered under the WTO framework):  assistance to develop trade infrastructure,
especially for landlocked least developed countries;  further debt relief;  examination of commodity
markets and resulting low prices;  establishment of  permanent institutions to facilitate technology
transfer;  and creation of a trust fund to ensure that developing countries have sufficient finance to
implement their multilateral obligations.
13  In addition, developed WTO Members must meet their
market-access commitments for developing countries in sectors of export interest to developing
countries, including for agricultural products, and adopt special arrangements for least developed
countries to provide bound duty-free and quota-free market access for all such products.  Malawi isconcerned about erosion of preferential treatment granted to least developed nations by developed
countries.  In agriculture, Malawi believes that developed countries must substantially and
progressively reduce trade-distorting domestic-support measures as well as export subsidies, with a
view to their elimination, while the multilateral tr ading system should provide more flexibility for
developing nations to apply domestic-support measures necessary to develop agriculture and foodsecurity.  Shortcomings in the TRIPS Agreement, unfavourable to least developed countries, should
also be addressed, and developing country provisions  on services should be implemented effectively
along with the introduction of a safeguard mechanism.
27. Within the multilateral system, Malawi follows closely the work of the WTO Committee on
Trade and Development and the Sub-Committee on Least-Developed Countries.  A WTO study
                                                     
13 WTO document WT/GC/W/451, 11 October 2001, and "Report of the Trade Ministers of
COMESA/SADC", Preparatory Meeting to the Fourth WTO Ministerial Conference to be held in Doha, Qatar,
30 July 2001.Malawi WT/TPR/S/96
Page 19
concluded that MFN tariff rates on products of export interest to least developed countries, including
Malawi, were substantially higher in developing and transition economies than in developed
countries.14  In Malawi's case, the study found that applied MFN tariffs on exports of agricultural and
non-agricultural products to developed countries averaged 14.2% and 17.2% respectively (2.5% and
9.7% if preferential tariff rates were taken into account) compared with 20.1% and 29.1% in
developing markets.
28. Malawi is a member of the United Nations and its agencies, and other multilateral institutions,
such as the International Monetary Fund, the World Bank, and the African Development Bank.
(ii) Trade-related technical assistance
29. Malawi does not have diplomatic representation in Geneva;  technical assistance is one of the
important activities that link Malawi and the WTO.  Like other LDCs, Malawi's needs in the area oftrade are numerous, and often compounded by issues ranging from the implementation of WTO
Agreements, through human and institutional capacities, to the supply-side constraints.  While past
assistance from various sources has been valuable, further assistance is required to fully meet the
needs.  At the same time, it is essential that such assistance be better coordinated among the providers,
given the limited absorptive capacity of the Government institutions dealing with trade matters.
(a) Trade-related technical-assistance needs
15
Implementation of WTO Agreements
30. Malawi faces difficulties in implementing various provisions of the WTO Agreements.  Its
implementation-related difficulties are primarily attributed to weak institutional capacity of the
implementing agencies.  Specific areas of the needs are:  (i) alignment of national laws, rules, and
regulations to WTO requirements;  (ii) notification requirements;  (iii) training of Government
officials on WTO matters, including capacity building for negotiations.  While assistance has beenprovided by the WTO Secretariat, other inter-governmental organizations, and bilateral donors to
meet the general needs, Malawi would require further assistance, not only in terms of volume but also
more customized to meet its specific concerns, in order to enjoy the benefits of participation in the
multilateral trading system.  Moreover, meaningful implementation of the WTO Agreements would
require, in some cases, the establishment of new institutions, or strengthening of existing ones, whichmay have large financial implications and would also require interventions by multiple assistance
providers with different competencies.
31. Malawi's specific implementation-related concerns are in the areas of customs valuation, anti-
dumping, safeguards, countervailing, SPS and TRIPS.  In customs valuation, the lack of human and
institutional capacity at Customs had led to the introduction of preshipment inspection in 1995, whichhas been contracted to the Société Générale de Surveillance (SGS), as a temporary measure
(Chapter III(2)(iv)).  As part of its contract with the Government, the SGS is currently providing
training on valuation to customs officials, to prepare for the scheduled transfer of the services to the
MRA in March 2003.  Training in classification is currently provided by the World Customs
                                                     
14 WTO document WT/COMTD/LDC/W/17, 25 January 2000.  The study excluded preferential
treatment extended under regional or bilateral arrangements, such as the Lomé Convention (now Cotonou
Agreement).
15 Information contained in this section is drawn from (i) the Needs Assessment, which was undertaken
under the Integrated Framework in 1998;  (ii) the report of a technical mission, which was jointly organized inMay 2000 with the Commonwealth Secretariat to assess the technical-assistance needs of Malawi;  and(iii) "Issues and Proposals for the Fourth WTO Ministerial Conference", contained in document WT/GC/W/451.WT/TPR/S/96 Trade Policy Review
Page 20
Organization (WCO) and the Common Market for Ea stern and Southern Africa (COMESA).  The
benefits arising from the implementation of the Agreement on Customs Valuation, however, cannot
be fully realized without capacity building in the area of enforcement, and installation and
enhancement of customs-related infrastructure.  According to the authorities, the computerization at
customs stations is the single most important step required for the MRA to resume the function of
customs valuation, based on the use of transaction value, and risk management.  Currently, about 85%of the border stations are computerized.  In addition, the installation of other customs-related
infrastructure, including a customs laboratory for classification purposes, and a large scanner for
cargo containers, would help expedite customs clearance.
32. Regarding laws on contingency trade remedies, Malawi has received technical assistance
from the U.K. Department for International Development (DFID) to revise its old, unused anti-dumping legislation, and to prepare legislation on countervailing and safeguard measures, in line with
WTO rules (Chapter III(2)(vi) ).  According to the authorities, even  if such legislation is put in place,
Malawi would need further assistance:  (i) to establish an independent body to administer the
legislation;  (ii) to train staff on how to conduct investigations, based on the rules and procedures
established by the Agreements on Anti-Dumping Practices, and on Subsidies and CountervailingMeasures.  This would also imply financial allocation at the domestic level, for full implementation of
the legislation.
33. With respect to intellectual property rights (I PR), while Malawi intends to comply with the
TRIPS Agreement by the end of 2005, the absence of domestic expertise on IPR matters has
prevented the Government from initiating the review of its existing obsolete legislation
(Chapter III(4)(vi)).  The Registrar-General Department, which is responsible for the administration
of industrial property legislation, has no legal experts in IPR matters.  According to the authorities, noassistance has been provided by the WTO, WIPO or other institutions in this area.  There is therefore
an urgent need to develop the knowledge and skills  in the department, as well as in other public
institutions and the private sector, through training courses and workshops.  Legal advice would also
be necessary for the department to prepare new legislation in line with the provisions of the TRIPS
Agreement.  Furthermore, if WTO-consistent legislat ion is put in place, a further major hurdle will be
to provide effective enforcement, through inter alia , training of customs and police officials.
34. With a view to helping Malawi to keep up with its obligations in the WTO, the
Commonwealth Secretariat has financed a legal expert to be housed in the Ministry of Commerce and
Industry.  This has helped lessen the Ministry's reliance on the Ministry of Justice for legal advice, in
areas such as trade remedies.  Nonetheless, Malawi's needs for legal expertise remain, in particular, inTRIPS.  Moreover, Malawi's ability to comply to the WTO Agreements requires, in most cases,
establishment and enhancement of institutions and human resources, to administer such WTO-
compatible legislations.
35. Malawi has so far made relatively few notifications to the WTO (Table II.2).  According to
the authorities, the difficulties in meeting the noti fication requirements are due mainly to the lack of
understanding of these requirements, and of how they are to be made and submitted to the WTO
Secretariat.  While assistance has been provided by the WTO and Commonwealth Secretariats, a
national seminar focusing on notifications, together with a technical mission, might be considered for
future assistance.
16
                                                     
16 A session on notification requirements was allocated in the national workshop in October 1998, and
a one-day workshop on WTO notification requirements was organized by the World Bank and the WTO, viavideoconferencing in February 1999.  Malawi believes that the questionnaires and formats should be simplified,Malawi WT/TPR/S/96
Page 21
36. The limited training of government officials on WTO matters, including negotiating skills in
the multilateral context, is another constraint on Malawi's participation in the multilateral trading
system, which has been further hampered by the absence of diplomatic representation in Geneva (i.e.
the absence of "lobbies").  WTO affairs have been covered by its embassy located in Brussels, which
recently took over from the Embassy in Bonn, in or der to concentrate trade matters, including ACP
and EU relations, into a single location.  Nonethel ess, Malawi can rarely attend WTO meetings due to
financial limitations.  It has relied heavily on the Reference Centre and the WTO Non-Resident
initiatives for information on day-to-day activities of the WTO.17  Consideration is currently being
given to opening a mission in Geneva, and a feasibility visit was undertaken in January 2001, under
DFID funding.18
37. WTO technical assistance has so far focused on increasing the general understanding of
Government officials on WTO matters.  Since 1998, while there has been only one national seminar
on the multilateral trading system organized in the country, Malawian officials participated in some
16 regional seminars on various WTO-related issues.19  In addition, since 1995, four officials have
been trained in the 12-Week Trade Policy Courses and four in the 3-Week Short Trade Policy Courses
designed for LDCs.  According to the authorities, these seminars and training courses have beencritical in raising the level of familiarity with WTO Agreements.  However, more is required.  In
particular, national seminars and training of trainers are of crucial importance in expanding Malawi's
group of WTO experts.
Supply-side constraints
38. Supply-side constraints have been identified as among Malawi's major obstacles to trade
expansion.  These include:  land-lockedness, heavy dependence on agricultural production for export,
smallness of the domestic market, inappropriate technology, limited trade and industry financing,inadequate skilled manpower, lack of adequate network of trade representation abroad, limited
knowledge of export opportunities, weak infrastru cture, weak human and institutional capacity of
support institutions, and investment inadequacy.
20  Each of the bottlenecks adds to the costs of trading
in Malawi;  one trader estimated that taxes, transport, and additional costs added 80% to the original
cost of imports.21  Moreover, the problems are often inter-linked and compounded, impairing the
overall trading environment.  For instance, weak infrastructure, particularly the inadequate transport
systems in railways and roads, and limited air transport services, has compounded the problems of
Malawi's landlocked situation and small market, thereby hindering its participation in international
trade (Chapter IV(5)(iii)).  Other infrastructural bottlenecks, including frequent breakdowns in
                                                                                                                                                                    
and that all LDCs should be exempted from notifying certain types of ad-hoc measures (WTO document
WT/GC/W/451).
17 The Reference Centre, installed at the Ministry of Trade and Industry in 1998, provides an electronic
link to the WTO, thereby en abling Government officials, business and the academic communities, and others, to
obtain trade-related information and documents from the WTO Internet web site and databases.  As part of theNon-Resident initiatives, Malawi receives regular WTO Briefing Notes prepared by the Secretariat, which
provide a summary of meetings of the various WTO Committees and Bodies, as well as daily trade news
summaries based on despatches by wire agencies. Furthermore, since 1999, Malawi has participated in theannual "Geneva Week", during which non-resident representatives are invited to the WTO for briefing on thestate of play of work, and participation in the work of WTO bodies.
18 The Commonwealth Secretariat is also considering opening a mission in Geneva for non-resident
members of the Commonwealth.
19 Malawi participated in regional seminars on regional integration;  dispute settlement procedures and
practices;  market access and IDB;  PSI;  trade and the environment;  Reference Centre and NotificationRequirements;  SPS;  TRIPS;  TBT;  and WTO Rules.
20 WTO document WT/COMTD/IF/37, 18 September 1998.
21 Page (2001).WT/TPR/S/96 Trade Policy Review
Page 22
communication and utility services, such as electricity, telephone, water, sewerage facilities, may be
linked to the problems of inappropriate technology and inadequate investment.  Lack of knowledge of
export opportunities and export financing facilities has constrained the country's ability to diversify its
narrow export base, not only of export products, bu t also export markets (Chapter IV(2)).  Therefore,
it is essential that the problems are addressed together in a comprehensive framework.
39. The Government has taken some action to address the supply-side constraints.  In the area of
infrastructure, the Government has been trying to improve efficiency through privatization and greater
participation of the private sector in the obsolete, state-controlled services subsectors, such as
railways, telecommunications, and power (Chapter III(4)(iii), and Chapter IV(3)(ii) and (5)(ii)).
There are also a number of on-going trade-related projects by bilateral and multilateral donors to
address the problems (Table AII.1).  However, numerous needs remain, including, inter alia ,
strengthening the institutional capacity of trade-supporting institutions;  improving export financing
facilities;  and information technology equipment to allow access to updated market information.  If
these needs are to be addressed, they would require actions not only by a large number of assistance
providers, but would also better coordination among them.  In this regard, the Integrated Framework,
a mechanism in which the six multilateral agencies (IMF, ITC, UNCTAD, UNDP, World Bank, andWTO) coordinate the delivery of trade-related technical assistance to LDCs, may help Malawi to
bring greater cohesion in policy-making in the area of  trade by mainstreaming trade priorities into the
country's poverty-reduction strategy.
(b) Mainstreaming trade into Malawi's development framework
40. The Integrated Framework (IF) emphasizes the importance of mainstreaming a country's trade
priorities into its national development plan or poverty-reduction strategy.  In order for trade to foster
pro-poor economic growth, the IF advocates that mainstreaming be achieved at three levels – policy,institutional, and Government-donor partnershi p.  The Integrated Framework is currently
implemented on a pilot basis.  Malawi was selected as one of the pilot countries as part of the
extension of the IF Pilot Scheme in October 2001.  As the first step in undertaking mainstreaming
work, the six IF agencies will start the preparation in early 2002 for a diagnostic trade integration
study to assess the competitiveness of the economy, and identify the impediments to effectiveintegration into the multilateral trading system and the global economy.
Mainstreaming at the policy level
41. The Malawi Poverty Reduction Strategy (MPRS) provides a medium-term framework for
Malawi's policy planning and programming, including the prioritization of public expenditure to
address the target outlined in the strategy.  Malawi is currently preparing a full Poverty ReductionStrategy Paper (PRSP), which builds on its Interim MPRS adopted in December 2000.  The full
MPRS was completed in November 2001.  The MPRS translates the country's overall vision, as
expressed in the long-term policy framework Vision 2020, into more practically defined and
prioritized strategies.  The strategy also encompasses a number of sector-specific plans, such as in
health, education, agriculture, security, and justice, to provide integrated and coherent planning, and amechanism for coordination.  There is currently no sector-specific plan for trade.  Priorities defined in
the MPRS are then consolidated into three-year sectoral medium-term expenditure frameworks and
annual budgets for implementation.
22
42. Sustainable pro-poor economic growth is one of the four pillars outlined in the MPRS, which
focuses on economically empowering the poor by ensuring access to credit and markets, skills
                                                     
22 The implementation of MPRS priorities are monitored through two annual review vehicles:  the
MPRS review and the Public Expenditure Review.Malawi WT/TPR/S/96
Page 23
development, and employment generation.  This objective is supplemented by three pillars – human
capital development, improvement of the quality of  life for the most vulnerable, and good governance
– and cross-cutting issues, such as HIV/AIDS, gender and empowerment, environment and natural
resources, and science and technology.  Strategic interventions to promote pro-poor economic growth
are targeted in three areas:  (i) agricultural and rural development;  (ii) strengthening and broadening
the industrial basis;  and (iii) investment in other enabling economic infrastructure.  Trade is notprominently reflected in the current MPRS, while it is recognized that the achievement of growth
depends on "the performance of the international economy and Malawi's ability to reposition itself to
take advantage of the created expansion of opportunities in world trade".
23  Under the IF, assistance
would be provided to assist Malawi in mainstr eaming trade into the MPRS, which would be reviewed
and updated periodically.24
Mainstreaming at the institutional level
43. The PRSP process is managed at three levels:  the National Steering Committee25;  the
Technical Committee26;  and the Thematic Working Groups (TWGs) focusing on specific issues.  The
Minister of Finance and Economic Planning has the overall responsibility over coordination and
implementation of the MPRS.  There are some 14 TWGs, each of which comprises diversestakeholders, including government officials, dono rs, non-governmental organizations, civil society,
and religious bodies, to make targeted contributions to the PRSP process.  Trade is said to be covered
by the Growth and Diversification Working Group, chaired by the National Economic Council, but in
particular, by one of its five subgroups on industry, chaired by the Ministry of Commerce and
Industry (MCI).
27  It appears, however, that the subgroup's work has been focused on industry aspects,
including manufacturing, tourism, and small-scale mining, as reflected in the current version of the
MPRS.  According to the authorities, the Department of Trade of the Ministry of Commerce andIndustry did not participate in the consultative process for the preparations of the MPRS.  As a result,
there is little emphasis on trade in the current version.
44. A study on institutional needs describes Malawi's challenges in the area of trade development
as a "mismatch" between its political aspirations for future improved trade performance and the
institutional capacities to design and implement the policies needed to achieve this improvedperformance.
28  While Malawi has entered into a series of multilateral, regional, and bilateral
agreements, which require the adoption of new policies, the requirements have often been well
beyond the institutional capacities to implement th em effectively.  The capacities of the MCI and
other trade-supporting institutions, such as MI PA, MEPC, MBS and the Malawi Confederation of
                                                     
23 Government of Malawi (2001).
24 The preparation of a diagnostic trade integration study will be led by the World Bank.  Once the
diagnostic study is completed, based on the findings of the study, an Action Plan will be developed inconsultation with all stakeholders.  The Action Plan will include a set of policy recommendations and prioritytechnical-assistance needs to overcome the constraints identified.  Lastly, trade policy priorities will beincorporated into the country's updated PRSP, and pr iority technical assistance would be considered for
financing at donors' financing fora, such as the World Bank Consultative Groups (CG) or UNDP Round Tables.
25 A National Steering Committee comprises the Minister of Finance and Economic Planning; the
Governor of the Reserve Bank of Malawi;  the Director General of the National Economic Council;  theMinister of Education, Science and Technology;  the Minister of Health and Population;  the Minister ofAgriculture and Irrigation; and the Minister of Transport and Public Works.  This Steering Committee is chairedby the Minister of Finance and Economic Planning.
26 The Technical Committee is responsible, inter alia , for carrying out nation-wide consultations,
analytical work, and drawing up strategies with the guidance of the Committee of Principal Secretaries.  TheTechnical Committee will be led by the National Economic Council.
27 The other four subgroups are on infrastructure, credit, taxation, and science and technology.
28 Ministry of Commerce and Industry (2001).WT/TPR/S/96 Trade Policy Review
Page 24
Chambers of Commerce and Industry (MCCCI), are constrained by limited funding for their
activities.  Moreover, responsibility for trade-policy formulation and implementation is often spread
among the institutions or overlaps, without an overall authority.29  Such fragmentation of the available
efforts has led to competition for resources and duplication of effort among them.
Mainstreaming at the Government-donor partnership level
45. While an array of assistance is being provided to Malawi, partly due to the general absence of
coordination at the policy and institutional levels, little coordination exists among development
partners.  The DFID, the EU, UNDP, USAID, the World Bank are active in the trade-related area
(Table AII.1).  The absence of coordination not only limits the benefits of such assistance, but also
imposes a burden on the Government, whose capacity is over-stretched.  This is one of the areas in
which the IF intends to provide an integrated approach within a coherent policy framework.
(iii) Regional agreements
46. Malawi is actively involved in two main regional trading arrangements:  the Common Market
For Eastern and Southern Africa (COMESA), and the Southern African Development Community
(SADC).  It has also concluded several bilateral agreements on trade, and is a member of the Cotonou
Agreement, which is expected to lead to Region al Economic Partnership Agreements with the EU.
The Government believes that such agreements provide a first step towards greater integration and
wider liberalization, and is keen to negotiate additional bilateral agreements.
47. Malawi's membership of overlapping regional and bilateral arrangements with different
geographical coverage, trade liberalization agenda, trading rules (such as on non-tariff measures,
phase-in periods and rules of origin), and goals, makes its trade regime more complex.30  Its trading
partners receive different access conditions to the Malawi market depending upon which agreement
they are in, and the stage of implementation of the agreement by the partners;  members of more thanone agreement can trade with Malawi under either agreement.  The same applies to Malawi's exports
to these markets.  This may distort trade and incentive patterns in an unpredictable manner and could
entail inconsistent obligations being undertaken by Malawi.
Common Market for Eastern and Southern Africa (COMESA)
48. Malawi was a founding member of the Preferential Trade Area for Eastern and Southern
African States (PTA), which became to COMESA in late 1994.
31  The COMESA agenda is to deepen
and broaden the integration process among member states through:  the adoption of more
comprehensive trade liberalization measures, such as the complete elimination of tariffs and non-tariff
barriers to trade, and the adoption of a common external tariff (CET);  the free movement of capital,
labour, goods, and the right of establishment within COMESA;  the adoption of a common set ofstandards and technical regulations, quality control procedures, certification schemes, and sanitary
and phytosanitary regulations;  the standardization of taxation rates (including value-added tax and
                                                     
29 Page (2001).
30 In total, there are nine common members of SADC and COMESA. These are Angola, the
Democratic Republic of the Congo, Malawi, Mauritius, Namibia, Seychelles, Swaziland, Zambia, andZimbabwe.  Other regional groupings having cross-membership with SADC/COMESA are the Southern African
Customs Union (SACU), Indian Ocean Commission (IOC), East African Cooperation Commission, and the
Inter-governmental Authority on Development (IGAD).
31 Other members are Angola, Burundi, Comoros,  Djibouti, Egypt, Eritrea, Ethiopia, Kenya,
Madagascar, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, the Democratic Republic ofthe Congo, Zambia, and Zimbabwe.  Tanzania, Lesotho, and Mozambique have withdrawn.Malawi WT/TPR/S/96
Page 25
excise duties), and conditions regarding industrial cooperation, particularly on company laws,
intellectual property rights, and investment laws;  application of harmonized competition policies;
and the establishment of a Monetary Union.32  COMESA was notified to the WTO under the
"Enabling Clause".
49. COMESA is thus to be a customs and monetary union.  Its Free Trade Area (FTA) was
launched on 1 November 2000;  Malawi and eight other members met this deadline.33  Several other
members are intending to join the FTA in 2001.34  The customs union is to be implemented by
1 November 2004 with a Common External Tariff (CET)  comprising four tariff bands:  zero, 5%,
15%, and 30% (on capital goods, raw materials, intermediate goods, and final goods, respectively).
However, since most COMESA members, including  Malawi, have maximum tariff bands below 30%,
discussions are under way on the possibility of reducing the agreed CET rate on final goods.
50. Tariff preferences are subject to rules of orig in requirements.  COME SA provides for four
alternative criteria for determining origin on whic h an exporter may claim eligibility for preferential
treatment:  that goods are wholly produced in the region using no outside materials;  that imported
content of goods is not more than 60% of the c.i.f. value of the total cost of materials used in
production;  that goods contain not less than 35% ex-factory value added35, reduced to 25% if the final
product is considered to be of "particular importance" to the economic development of a member
state36;  or that there is a change of tariff classification heading following transformation.
51. The Monetary Harmonisation Programme is to be implemented in four phases, from 1992 to
2025.  The final phase should culminate in full monetary union, with the use of irrevocable fixed
exchange rates, a single currency, or parallel currencies;  full harmonization of economic, fiscal, and
monetary policies of member states;  full integration of the financial structure;  pooling of foreign
reserves;  and the establishment of a common monetary authority.  In May 1999, the programme wasre-launched with the introduction of limited currency convertibility between member states with
substantial cross-border trade.  A coordinating body comprising regional experts from central banks
and Finance Ministries was formed to oversee implementation of policy measures and to advance the
process of monetary harmonization towards monetary union.
52. Several institutions have been established to assist COMESA members in their development.
The Eastern and Southern African Trade and Development Bank (PTA Bank) provides trade and
project financing to public and private investors domiciled in a bank member state, which includes
                                                     
32 Further information is available online at:  http://www.comesa.org/obj.htm.
33 The other members are Djibouti, Egypt, Kenya, Madagascar, Mauritius, Sudan, Zambia, and
Zimbabwe.  Merchandise trade between the FTA COMESA members is at zero tariffs, without exception.
34 The status of implementation of the tariff reduction programme varies substantially among the
members yet to join the FTA.  Burundi, Democratic Republic of the Congo, Rwanda, Seychelles, and Uganda
have indicated their intention to accede to the FTA du ring 2001, but had not acceded as at September. Comoros
has reaffirmed its commitment to join the FTA, while Eritrea and Ethiopia are investigating the implications of
membership.  Namibia and Swaziland are non-reciprocal members of the FTA and hence receive but do nothave to provide duty-free access.  The COMESA Treat y therefore provides for a multi-speed integration
programme.  See Imani-Capricorn Economic Consultants (2001).
35 "Value added" is defined as the difference between the ex-factory cost of the finished products and
the c.i.f. value of material inputs imported from outside the COMESA sub-region.  The minimum level of value
added was reduced from 45% to 35% in 2000.  Egypt and Uganda maintain (through a waiver) the 45% ex-factory value-added level.
36 A wide list of approved products is specified in the COMESA Treaty as being of particular
importance to the economic development of the members.WT/TPR/S/96 Trade Policy Review
Page 26
Malawi.37  The COMESA Clearing House has diminish ed in importance following liberalization of
most members' foreign exchange regimes.  Its roles are being re-directed towards improving the
efficiency of clearing operations to complement the services offered by commercial banks;  providing
traders with some form of political insurance on intra-regional trade;  and facilitating monetary and
fiscal policy harmonization within the region.38  The PTA Re-Insurance Company (ZEP-RE) assists
the development of the insurance and re-insur ance industry in the COMESA region.  Although
Malawi is a signatory to the agreement establishing the Company, no Malawian insurance company is
a shareholder.39  The Africa Trade Insurance Agency (ATI), launched in August 2001, is aimed at
creating investor confidence by providing cover against political risk.  Although promoted by
COMESA, membership of ATI is open to all the member States of the Organization of African Unity
OAU.40  The COMESA Court of Justice became opera tional in 1998.  Its general jurisdiction is to
adjudicate upon all matters that may be referred to it under the Treaty.  Malawi has not been involved
in any formal disputes within this framework.
53. The protocol on the free movement of persons is to be implemented in several stages;  the
first stage of removing visa requirements was to be adopted in 2000.  Most countries, including
Malawi, have removed the visa requirements.
Southern African Development Community (SADC)
54. The SADC Treaty was signed in 1992 with the objective of creating a development
community that would achieve economic integration, including trade.  Through regional cooperation
and integration, the Community aims to provide balanced economic growth and development,
political stability, and security for all member states.  Membership covers the countries of the
Southern African Customs Union (SACU), i.e. Botswana, Lesotho, Namibia, South Africa, and
Swaziland, as well as nine other countries.41  The Treaty provides a framework to coordinate,
harmonize, and rationalize policies, and to develop strategies for sustainable development.  It is based
on the fundamental principles of sovereign equality of member states;  solidarity, peace and security;
human rights, democracy, and the rule of law;  and equity, balance, and mutual benefit.  Decisions
and agreements are legally binding on members, and the Treaty provides for several protocols in
specific areas, such as trade, finance, and investment.
55. The Trade Protocol, signed in 1996, is aimed at  progressively establishing a SADC free-trade
area, initially over eight years.  However, progress has been slow.  The Protocol was not launched
until September 2000, following ratification by 11 members, and came into force on
                                                     
37 Not all COMESA members are members of th e PTA Bank:  Angola, Namibia, Seychelles,
Swaziland, Uganda, and the Democratic Republic of the Congo are not members.  Egypt joined the Bank in2000.  Since 1994, non-COMESA members may become Bank members;  Somalia, Tanzania, and, since 2001,China are such members.
38 Due to its restructuring, the COMESA Clearing House was unable to assist Malawians who have
recently experienced difficulties exporting to Zimbabwe.  The Malawian authorities therefore believe that the
House still has an important role to play and should be restored.
39 Not all COMESA countries are signatories, and some members are non-COMESA countries.
Members of the agreement establishing the company ar e Angola, Burundi, Comoros, Djibouti, Eritrea, Kenya,
Lesotho, Malawi, Madagascar, Mozambique, Rwanda, Somalia, Sudan, Tanzania, Uganda, Zambia, andZimbabwe.  Currently, the shareholders are companies from Burundi, Democratic Republic of the Congo,
Eritrea, Kenya, Madagascar, Mozambique, Rwanda, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
40 Other founding members of ATI, with Malawi, are Burundi, Kenya, Rwanda, Tanzania, Uganda, and
Zambia. Only Tanzania is a non-COMESA country.  As from 2002, the African Union will replace the OAU.
41 These are Angola, the Democratic Republic of the Congo, Malawi, Mauritius, Mozambique,
Seychelles, Tanzania, Zambia, and Zimbabwe.Malawi WT/TPR/S/96
Page 27
26 January 2001.42  To establish the FTA, products have been grouped under three main categories
(A, B, and C).  Category A products (mostly capital goods and equipment already subject to low tariff
rates in each member state) are to be liberalized in the first year.  Category B products (e.g. goods that
constitute important sources of customs revenue) are to be liberalized gradually by 2008.43
Category C consists of products deemed sensitive by member states (e.g. imports sensitive todomestic industries);  these goods, limited to a maximum of 15% of each member's total merchandisetrade, are to be liberalized from 2005 to 2012.  Sensitive products for Malawi are sugar,
confectionery, beer, textiles, matches, and motor vehicles.  In addition, a fourth category of products,
Category E, covers products ineligible for preferential treatment under general and security exceptions
permissible under Articles 9 and 10 of the Protocol.  These are expected to make up a small list of
products, so that by 2012 about 98% of SADC merchandise trade will be subject to zero tariffs.  Thephase-down offers are country specific.  Implementation of the Protocol is based on the principle of
reciprocity, i.e. tariff preferences will be extended only to those member states that have submitted
their instruments of implementation.
56. SADC members made "differentiated offers " to non-SACU SADC countries, and "general
offers" to SACU members.  Moreover, SACU members made offers to the other SADC members forimmediate reductions to achieve zero tariffs after five years, except for sensitive products.
Differentiated offers heavily front-loaded tariff reductions, while general offers mid- to back-loaded
tariff reductions.
44  Offers by the other SADC members to SACU members thereby delay tariff
reductions on category A and B products while they are heavily front-loaded for non-SACU members.
Moreover, tariff reductions on the sensitive products (Category C) are further delayed from the eighth
to the twelfth year.  This asymmetrical implementation is seen as a means of enhancing equity in the
region since South Africa, the principal SACU member, is far more developed than other SADCmembers.  Zimbabwe and Mauritius also agreed to start their tariff reductions earlier than other non-
SACU members.
57. As at March 2001, Malawi and seven other member states (Botswana, Lesotho, Mauritius,
South Africa, Swaziland, Zambia, and Zimbabwe) had submitted their implementation instruments.
45
At the August 2000 SADC Summit, in Windhoek, memb er countries were given six months to make
the necessary national constitutional amendments and to deposit their respective instruments of
implementation.46
58. Substantial progress has already been made on harmonizing customs and trade
documentation.  SADC rules of origin are being negotiated in many cases on a product-by-product
basis.  The rules of origin are therefore complex and apply various origin criteria across products.Protracted negotiations on specific rules of origin are continuing for certain products, including wheat
flour;  cereals and flour;  textiles and clothing;  plastics;  electrical products and machinery;
                                                     
42 The three members that have not yet ratified the Protocol are Angola, Democratic Republic of the
Congo, and the Seychelles.  Angola and the Democratic Republic of the Congo have indicated their readiness toaccede.
43 This group was further sub-divided into three categories.  Category B1 products are to have their
tariff rates reduced gradually commencing in the third y ear;  category B2 products commencing in the fifth year;
and category B3 products commencing in the seventh or eighth year.  Category A and B products cover an
estimated 85% of goods traded among SADC members.
44 Imani Development (Malawi) (2001).
45 L'Express , 15 March 2001.
46 There is no deadline, as such, for the implementation of the Trade Protocol.WT/TPR/S/96 Trade Policy Review
Page 28
automobiles;  and optical, photographic, measuring, and surgical instruments.  These are expected to
be finalized by end 2001.47
59. Sugar is covered by a special agreement annexed to the Trade Protocol and administered by a
Technical Committee on Sugar.  This agreement includes the provisions of access to the SACU
market for non-SACU SADC members, which include Malawi.48  It is based on non-reciprocal and
duty-free-quota access for a period of five years ( 2001-05) after which it will be reviewed.  The
SACU has offered a total quota of 20,000 tonnes as from 2001, supplemented by market growth
allowances.  The quota is to be allocated betw een non-SACU sugar-producing SADC countries, based
on a formula reflecting their world market sales to non-preferential markets;  the higher the latter the
higher the annual quota allocation to the country.  Malawi’s total quota entitlement for 2001 was
approximately 6,000 tonnes.  Allocations are not transferable between countries, and unused quotawill be reallocated only in situations of force majeure.  The long-term objective of the agreement is to
establish full liberalization of trade in  sugar within the SADC region from 2013.
60. A sensitive area involving Malawi has been negotiations on textiles and clothing, which had
become a major problem under the bilateral South Africa/Malawi Trade Agreement (Section (iv)).
Though negotiations in the SADC Textile and Clothing Committee are incomplete, a derogation hasbeen granted to least developed members of S ADC (Malawi, Mozambique, Tanzania, and Zambia)
allowing them to export (duty-free but subject to quota) to SACU countries single-stage produced
textiles and clothing, for five years (until 2005).
49  Malawi's total quota in 2001 was 1,908 tonnes and
8,565 units.50
61. While the Trade Protocol has identified several non-tariff measures for elimination, such as
import quotas, surcharges, customs procedures, and export subsidies, it excludes other important non-
tariff barriers, such as domestic-content requirements, levies and other border charges, and import(and export) licensing.
51  Malawi had introduced new non-tariff measures against certain SADC
trading partners since signing the Protocol, such as quantitative restrictions on imported tobacco leaf
from some SADC members, especially Mozambique.52  These measures no longer exist according to
Malawian authorities.
62. The SADC Treaty also provides for a tribunal to  be established (the Protocol on Tribunal) to
adjudicate members' disputes arising from the Treaty, and from subsidiary instruments, that cannot be
settled by consultation.53  Its composition, powers, functions, procedures, and other related matters are
prescribed in the Protocol, and the Rules of Procedure were agreed by SADC members in August
2000.  Decisions of the Tribunal, when established, will be final and binding.54
63. A number of studies have concluded that the static gains from trade creation of SADC will be
small, and that they will be mainly trade diverting.  However, other studies have suggested that the
                                                     
47 For example, the problem on electrical machinery is that some members want to prevent single
assembly of white goods, while on plastics they want to prevent the use of imported plastic waste.  See Imani
Development (Malawi) Ltd (20001b), p. 24.
48 Other non-SACU SADC members are Angola, the Democratic Republic of the Congo, Mozambique,
Seychelles, Zambia and Zimbabwe.
49 Coughlin and Undenge (2001).
50 The quota comprised 1,100 tonnes for products classified in HS Chapter 52; 43 tonnes for Chapter
55;  200 tonnes for Chapter 60;  8,565 units for Chapters 61 and 62;  and 565 tonnes for Chapter 63.  SACU's
quotas do not contain any automatic annual growth factors.
51 Imani Development (Malawi) Ltd (2001a).
52 Filmer (2000).
53 Article 32 of the Treaty.
54 SADC online information.  Available at:  http://www.sadc.int/overview/works.htm.Malawi WT/TPR/S/96
Page 29
dynamic gains from scale economies in production and marketing, and from cross-border competition
affecting technological transfers may be substantial.55
64. Because a large component of Malawi's trade from SADC countries, excluding South Africa,
already receives COMESA preferences, the Malawi reductions do not involve major tariff cuts
overall.56  After eight years, the trade-weighted aver age tariff on imports from SADC countries,
excluding South Africa, would fall from 2.5% to 1%.  However, because South Africa previously
received no preferences from Malawi, the average tariff on imports from South Africa would drop
from 10.4% to 2.9%.  As indicated, these falls are very much back-loaded, and will not commence
until the fifth year.  The main direct impact of SADC on Malawi will be the extension of duty-free
access to imports from South Africa, by far its main single trading partner (Chapter I(3)(i));  Malawi
already receives non-reciprocal duty-free access to the South African market through a bilateralagreement.  The SADC Free Trade Area has not yet been notified to the WTO.
65. SADC intends to extend trade liberalization to services, but such negotiations are yet to
commence.
Regional Integration Facilitation Forum (RIFF)
66. The Regional Integration Facilitation Forum (RIFF), formerly known as the Cross-Border
Initiative (CBI), aims to move member countries (including Malawi) towards increased economic
integration by facilitating private investment, trade, and payments between them, as well as
cross-border mobility of labour and capital.  Member states are the countries in eastern and southern
Africa, and the Indian Ocean.
57  The RIFF was developed in close collaboration with the economic
integration organizations in the region.  As a forum, the RIFF is to reinforce and complement efforts
undertaken by these organizations.  Launched in 1992, the RIFF is co-sponsored by the European
Commission, the International Monetary Fund, the World Bank, and the African Development Bank.It has no Secretariat and works on a voluntary basis.
The Organization of African Unity (OAU) and African Economic Community (AEC)
67. The Charter establishing the OAU was signed by 30 African nations on 25 May 1963.
58
Malawi, like the other members of the OAU, signed the Abuja (Nigeria) Treaty Establishing the AEC
in June 1991, as provided for by the 1980 Lagos Plan of Action.  Its main aim is to promoteintegration and harmonization within Africa.  The Treaty provides for the creation of a pan-African
economic and monetary union (with a parliament) in si x stages, over a period of 34 years.  The organs
and headquarters of the AEC are those of the OAU.  The AEC has not as yet effectively commenced
its activities.
68. The African Union was launched in July 2001 to replace the OAU as from 2002.
(iv) Bilateral agreements
69. Malawi has bilateral trade agreements, mainly with South Africa and Zimbabwe, and is
negotiating similar agreements with Zambia, Tanzania, and Mozambique.
                                                     
55 See Imani Development (Malawi) Ltd (2001a).
56 Filmer (2000).
57 Other participants are Burundi, Comoros, Kenya, Madagascar, Mauritius, Namibia, Rwanda,
Seychelles, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe.  Mozambique has indicated its intention tojoin.
58 Almost all African countries are members of the OAU.WT/TPR/S/96 Trade Policy Review
Page 30
70. Malawi's trade agreement with South Africa was formed in 1990.  It is a non-reciprocal
agreement whereby South Africa allows duty-free imports of all goods grown, produced or
manufactured in Malawi, subject to a minimum domestic value-added content of 25%.59  Quotas
apply to some products, such as tea, which is limited to 10,000 tonnes annually.  The agreement may
be terminated by either party with 12 month's written notice.  It contains anti-dumping and
countervailing provisions.
71. Malawian exporters, especially of garments, heavily used this agreement to gain preferential
access to the South African market.  However, the ag reement became strained in recent years, when
Malawian garment and bed linen exporters faced difficulties on the South African market based on
allegations that manufacturers were not meeting the 25% rule of origin;  this rule had become onerous
for them to prove.60  Most exporters benefited from having export-processing-zone status in Malawi.
72. Adopted in 1986 and modified in 1995, the bila teral trade agreement with Zimbabwe allows
duty-free imports on a reciprocal basis between the two countries, provided the goods meet 25%
minimum domestic content provisions and conform to each other’s national standards.  Trade
restrictions that are WTO compliant are allowed.  The agreement faces implementation problems,
including weak certification rules, and contains no dispute settlement provisions.  Either party mayterminate the Agreement with six month's written notice.  It is currently being re-negotiated, largely at
the Malawian Government's insistence.  The revised draft includes sensitive product lists,
manufacturing certification, dispute settlement procedures, and origin rules based on, inter alia,
change in tariff headings.
61  Zimbabwe is therefore covered by the COMESA and SADC Free Trade
Areas as well as the bilateral agreement.  Although both the COMESA Free Trade Area and the
bilateral agreement provide for zero tariffs, the latter has the least stringent rules of origin (25%
instead of 35%), among others.
73. Malawi has an old reciprocal customs agreement with Botswana dating back to the late 1960s,
which works on a "de facto" basis, whereby all goods, except spirits, reared, grown or produced can
be imported duty free.  Although Malawi has exported sugar to Botswana under this agreement, it is
rarely used.  A similar agreement exists with Mozambique whereby live animals (except poultry),
uncanned fish, and unmanufactured products, including foodstuffs, can be imported duty free.  Thisagreement is also rarely used.
74. Malawi is negotiating a bilateral agreement with Zambia, which is already a member of both
COMESA (free-trade area) and SADC .  These negotiations, which began in 1997, were suspended,
they recommenced in April 2001.  Although free tr ade is already provided  for under COMESA, it is
proposed to make the rules of origin lower under the bilateral agreement, at 25% instead of 35%.
75. Malawi is also negotiating bilateral agreements with Tanzania and Mozambique, both
countries having withdrawn fr om COMESA, but are still members of SADC.  The Malawian
authorities see these as largely interim agreements until the SADC Free Trade Area is established.
Different, probably lower, rules of origin from those for SADC are also being considered in the
bilateral agreements.
                                                     
59 More specifically, at least 25% of the production cost of goods must be Malawian materials and
labour, and the last production or manufacturing process must have been in Malawi (Articles 2 and 6 of theMalawi/South Africa Trade Agreement).
60 The value added used excluded profit, as well as administrative, general, and other expenses.  See
Coughlin and Undenge (2001), p. 3.  However, because Malawi's clothing and bed linen rely substantially onimported inputs from Asia, rules of origin can be an important constraint on its exports under the bilateralagreement.
61 Imani Development (Malawi) Ltd (2001a).Malawi WT/TPR/S/96
Page 31
(v) Generalized System of Preferences (GSP) and Global System of Trade Preferences
(GSTP)
76. Malawi benefits from GSP treatment from industrialized countries.  The EU’s "Everything
But Arms" (EBA) initiative, implemented from March 2001, has extended duty-and quota-free access
to EU imports of all products from least developed countries, except for arms.  Extension of this
preferential treatment to sugar, rice, and fresh bananas will follow specified schedules.62  Malawi also
exports 10,000 tonnes of sugar annually to the United States under duty-free GSP quota access.
77. Malawi is not a signatory of the GSTP among developing countries.
(vi) Other agreements and arrangements
The Cotonou Agreement
78. Malawi is a signatory to the Cotonou Agreement (successor to the Lomé Convention)
between the EU and 77 countries in Afri ca, the Caribbean, and the Pacific (ACP).63  The Agreement
maintains most non-reciprocal trade preferences granted by the EU to ACP States64, and has been
ratified by Malawi.  A decision to grant the waiver requested by the parties to the Agreement from the
obligations under Article I:1 of GATT 1994 (MFN treatment) was taken by WTO Members at the
Doha Ministerial Conference, for the period up to 31 December 2007.65  By then, new WTO-
compatible trading arrangements are to be concluded, removing barriers progressively between the
parties and enhancing cooperation in all areas relevant to trade, including the formation of free-trade
areas within 12 years, i.e. by 2020.66  During this period the EU is to enter negotiations with ACP
countries, scheduled to start in September 2002, aimed at establishing partnership agreements on a
bilateral basis or between the EU and regional gr oupings (regional economic partnership agreements)
to commence by January 2008 at the latest.  These would be based on reciprocal liberalization,
thereby requiring in principle Malawi and other ACP states to extend preferential access progressivelyto EU exports.
79. Under the Cotonou Agreement, the EU grants non-reciprocal trade preferences to most
imports originating from ACP states, subject to a safeguard clause and rules of origin.
67  For certain
products (bananas, beef and veal, and sugar), the EU provides special market access under
"commodity protocols".  The Cotonou Agreement abolished STABEX, SYSMIN, and the rumprotocol of the Lomé Conventions.
80. The EU is an important market for Malawi's main exports of tobacco, tea, coffee, and sugar,
which enter the EU at zero tariffs (Chapter I(3)(i )).  Its sugar exports, however, are covered by the
                                                     
62 WTO (2002);  and Europa online information.  Available at:  http//europa.eu.int/
comm/trade/miti/devel/eba4.htm.
63 The Cotonou Agreement was signed on 23 June 2000.  The fourth Lomé Convention had expired at
the end of February 2000.  Malawi joined the Group of ACP states in 1974.
64 South Africa was excluded from most of the provisions of the Lomé Conventions and now the
Cotonou Agreement, but has a separate Trade Development and Cooperation Agreement with the EU, signed inOctober 1999, which provides for asymmetrical trade lib eralization between the two countries to form a free-
trade area by 2012.
65 WTO document WT/MIN(01)/15,14 November 2001.
66 WTO document G/C/W/187.  The full text of the Cotonou Agreement was communicated to WTO
Members (WTO document G/C/W/187/Add.3 of 14 April 2000).
67 The rules of origin require that qualifying products be either "wholly obtained or significantly
worked or processed" in one or more ACP states.  The latter definition is based on the product being sufficientlymodified in the ACP state for it to be classified under a different four-digit HS tariff line.WT/TPR/S/96 Trade Policy Review
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Sugar Protocol under which Malawi is allocated and fully uses special quota access to the EU of
20,000 tonnes annually, at prices higher than the world levels.  According to the Malawian authorities,
complex procedures, including rules of origin, undermine the preferences.  Moreover, the recent
extension (by the EU) of Lomé preferences to all least developed countries under the "Everything But
Arms" (EBA) initiative, from March 200168, and the EU's own multilateral tariff reductions have
reduced their importance.
81. Malawi had received financial assistance from the EU under, inter alia,  the European
Development Fund (EDF);  the European Investment  Bank for commercial loans;  the STABEX;  and
the National Indicative Programme (NIP).  For example, the Tea Association of Malawi used
STABEX funds to assist smallholder grow ers, especially under the "tea replanting bonus
programme".69
The African Growth and Opportunity Act (AGOA), and other arrangements
82. The African Growth and Opportunity Act (AGOA), contained in the U.S. Trade and
Development Act of 2000, offers free access to some manufacturing products originating in African
countries.  A high-level dialogue on trade and in vestment under the U.S.-Sub-Saharan Africa Trade
and Economic Forum has also been established.  African countries eligible for preferential treatmentunder the AGOA will receive GSP treatment (exempt from the competitive needs limitations) in the
U.S. market until the end of September 2008, and will qualify for an expanded list of GSP products
(beyond that available to other countries).
70  All eligible African countries are entitled to unlimited
duty-free and quota-free access to the U.S. market for apparel made from U.S. fabric, yarn or thread.71
Lesser developed countries, including Malawi and 27 other eligible African countries with aper capita GNP below US$1,500 in 1998, may use non-U.S. fabric until end-September 2004.
72
83. To be eligible, African countries must make progress in establishing a market-based
economy;  developing political pluralism and the rule of law;  eliminating discriminatory barriers to
U.S. trade and investment;  protecting intellectual property;  combating corruption;  protecting human
and worker rights;  and removing certain practices of child labour.73  Although the apparel benefits in
principle took effect from 17 October 2000, countries must have in place an effective visa system to
prevent illegal transshipment and use of counterfeit documentation, as well as effective enforcementand verification procedures.  Malawi has completed the changes necessary to meet these requirements
to the satisfaction of the U.S. authorities, and began exporting garments under these arrangements
from August 2001.  Although many other products, incl uding certain processed agricultural goods, are
covered by the AGOA, Malawi's majo r agricultural exports of unprocessed sugar, tobacco, and tea are
ineligible.
84. Malawi has concluded several Joint Permanent Commissions of Cooperation to hold bilateral
consultations, including on trade, with neighbouring countries not covered by a trade agreement.
These are handled by the Ministry of Foreign Affairs and International Cooperation.  Malawi is a
member of the International Coffee Organization.
                                                     
68 See WTO (2001, TPR – Uganda) for details.
69 Magande and Ndela (2001), p. 24.
70 The list of manufactured goods (some 1,800 tariff lines) covered by AGOA includes products such
as footwear, luggage, handbags, and watches.
71 The legislation provides for an upper volume limit on such imports, rising from 1.5% of "aggregate
square metre equivalent" of all U.S. apparel imports to 3.5%, over an eight-year period.
72 Countries must also be beneficiary developing countries under the U.S. GSP scheme.
73 African Growth Opportunity Act [Online].  Available at:  www.agoa.gov/index.html.Malawi WT/TPR/S/96
Page 33
(6) INVESTMENT POLICIES AND PROCEDURES
(i) Regulatory framework
85. The Malawian Government promotes investment , including foreign direct investment, under
the Investment Promotion Act of 1991, which esta blished the Malawi Investment Promotion Agency
(MIPA) to administer the legislation and the country's investment policies.  The Agency is operating
as a "one-stop shop" to assist mainly foreign investors, by identifying possible joint-venture partnersand facilitating all aspects of the investment proce ss, including liaising with government authorities.
The Government's investment policy is contained in  the Statement of Investment Policies and the
Investor's Guide, which are both incorporated in the investment legislation.  The legislation covers all
direct investment, but currently directs the Agency to give priority to investment in manufacturing,
agriculture, mining, fisheries, tourism, and forestry.
86. No activities are reserved for Malawians.  Investors, both domestic and foreign, may invest in
any sector of the economy, with no restrictions on ownership, the size of investment, source of funds,
and irrespective of whether the products are exported or not.
74  Joint ventures are not required,
although domestic investors are encouraged to join with foreign investors.  Malawi also does not
impose performance requirements on foreign investors establishing commercial presence, exceptthose with EPZ status, and they do not have to meet  local-content requirements.  The legislation also
stipulates that the Government will not interfere in employers choice of workforce, and that it will
make available temporary employment residence permits for expatriate personnel needed in key
positions of investment projects.  These permits are for a maximum of three years, renewable.
87. Malawi's laws recognize the right of foreign and domestic private entities to own and operate
business enterprises.  Foreign entrepreneurs can establish a business in Malawi provided they have a
business residence permit, which is valid for five years, renewable.  Businesses can be operated assole proprietorships, limited partnerships or as companies incorporated under the Companies Act of
1984.  Local residents must comprise the majority of a company's board of directors, and number at
least three.  Foreign investors must register capital inflows for monitoring purposes, but no formal
application is required.
(ii) Investment incentives and promotion
88. Incentives are available to investors under the Investment Promotion Act (e.g. investment
allowances and duty-free importation of raw materi als used in manufacturing).  New investments,
both foreign and domestic, between US$5-10 million have the option of either a five-year tax holiday
or an indefinite company tax rate of 15% (instead of the standard rate of 30%);  for investments above
US$10 million, a ten-year holiday may be chosen.  The foreign investment share must be at least30%.  No investor has as yet exceeded the minimum investment threshold to receive tax holidays.
Although the Government may also declare certain "strategic" industries to be eligible for a tax
holiday of five years and thereafter a company tax rate of 15%, no such activities have yet been
declared by the Ministry of Finance and Economic Planning.
89. The Minister of Finance and Economic Planning also has discretion to rebate tariffs and
surtaxes on imported inputs where to do so is considered within the “public interest’ (section 52 of the
Finance and Audit Act).  Investment projects are considered eligible, and such rebates have been
granted frequently to investors in, for example, hotel projects.  The Government is currently
introducing specific criteria and a point-scale rating system on which to apply these rebates as a
means of limiting the discretionary element of the scheme.  The criteria for granting rebates to
                                                     
74 Paragraph 5 of the Statement of Investment Policies, Article 27, Investment Promotion Act of 1991.WT/TPR/S/96 Trade Policy Review
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investors are employment creation;  capital injection;  export potential;  domestic value added;
generation of net foreign exchange earnings;  promotion of high technology transfer;  creation of
inter-industry linkages;  and increasing the geographical spread of industries.  The rebate share is
determined according to a point system, with the maximum rebate set at 75%.75  The rebate extends
for the first ten years of operation, and the point system slightly favours investment in manufacturing,
agriculture, tourism, transport, and mining.  Appl ications are made to the Malawi Revenue Authority,
which makes recommendations to the Minister of  Finance and Economic Planning based on the
decisions of a Committee formed to review the application.76
90. Malawi's investment legislation and the Constitution provide for protection of investors'
assets against expropriation and nationalization.  The State may only acquire an enterprise if it is in
the national interest for a public purpose, and then only on payment of fair and adequatecompensation.  To provide further protection, the Government is a member of the Multilateral
Investment Guarantee Agency (MIGA) of the World Bank.  Malawi is a member of the Convention
for the Settlement of Investment Disputes.  It has initiated investment promotion and protection
agreements with a number of countries, including China, Germany, Italy, Malaysia, Mauritius,
Uganda, the United Kingdom, Zambia, and OPEC countries.  Malawi also has double taxationagreements with Denmark, France, Kenya, the Netherlands, Norway, South Africa, Sweden,
Switzerland, and the United Kingdom.
                                                     
75 For example, the points awarded for export potential increase from "one" if 5% to 20% of production
is exported to "five" if at least 85% is exported.
76 The Committee comprises the Malawi Revenue Authority, the Malawi Investment Promotion
Agency, the Ministry of Finance and Economic Planning, and the Ministry of Commerce and Industry.