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Ecama tips government on free trade area

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Sosten Gwengwe

Local economic think-tank, the Economics Association of Malawi (Ecama), has tipped the government to first consider formulating a clear roadmap if Malawi were not to turn into a dumpsite by becoming a signatory to the African Continental Free Trade Area (AfCFTA).

Ecama also suggests putting up a conducive business operating environment and creating awareness of the AfCFTA dictates to industry players if the country were to reap from the deal.

This is coming at a time the government is preparing instruments of ratification to be deposited to the African Union for Malawi to participate in continental trading under the pact.

Countries that already ratified are expected to start trading under the pact on Friday.

In an interview Ecama President Lauryn Nyasulu said, in such arrangements, there are always winners and losers but it all depends on how prepared Malawi is.

“We need to decide to be winners and take necessary steps to achieve that. The widening trade balance is a reflection of the underlying structural constraints the economy has.

“With or without the AfCFTA, Malawi needs to address these challenges and have strategies in place that will help minimise the trade balance and improve the balance of payment position,” Nyasulu said.

She added that, in participating, Malawi may benefit though simplified trade facilitation with the removal or reduction of tariff and non-tariff barriers.

Nyasulu further said, as a largely importing country, the AfCFTA would ease the process of importing raw materials from other African countries into Malawi.

Economics lecturer at Chancellor College Exley Silumbu said in a separate interview that although Malawi is a signatory to a number of bilateral, regional and preferential non-reciprocal trade agreements including the World Trade Organisation, the impact had been minimal.

He, however, said net gains for Malawi under AfCFTA may be on the lowest side and therefore expose the domestic industries to cut-throat competition.

“Since Malawi is one of the countries that will implement market access concessions with a longer period, 20 years instead of 10 years, it is important to ensure that other countries offer deeper tariff concessions to Malawi’s average.

“However, one of the problems here is that, although “infant industries” have been identified for a very long time, they are too inward-looking that they seem never to graduate into aggressive export orientation [drive],” Silumbu said.

He added that Malawi had to overcome supply-side constraints that have been used to delay ratifications of trade agreements and aggressively attract foreign direct investments from other African countries and beyond.

In an earlier interview Minister of Trade Sosten Gwengwe said the instruments of ratification were being vetted at the Ministry of Justice before they are submitted to the African Union.

The AfCFTA is expected to create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at $3.4 trillion.

It has the potential to lift 30 million people out of extreme poverty.

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