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Seizing business opportunities from China

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Moving from a predominantly importing and consuming country to a predominantly producing and exporting one was once a slogan for Malawi’s economic development agenda.

Not only did the slogan die but the country’s situation has worsened. Increasing trade deficit is one of features of the malnourished economy that is stuck in the dumps of the economic minnows of the world.

That might sound unpatriotic but it certainly is the hard reality that should fuel the anger needed to be vented on the prevailing situation.

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The rhetoric of industrialisation has been echoing within the four walls of the conference rooms where government, private sector, civil society and development partners often meet to discuss plans to jumpstart the ailing economy.

However, it is a common fact that the panacea remains actualizing the industrialisation rhetoric and give birth to jobs and increased taxes; therefore, improving income levels for both Malawians and their government.

Nevertheless, the country has undergone several economic reforms under the guidance of International Monetary Fund (IMF) but still fails to break the jinx as the UNDP puts poverty rate at 50.7 percent.

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Three decades ago, China’s poverty rate was worse than that of Malawi but its annual average growth rate of 9.5 percent over 35 years has helped its GDP to rank second in the world, a feat that has reduced poverty rate from over 85 percent during the period to just about 11.8 percent.

Initially an agriculture based economy like Malawi, China launched economic reforms premised on three dividends that include political and economic reforms and opening up, demographic dividend with skills based education system, and environmental resource management.

The opening up policy of China has since allowed over 4,000 foreign investment ventures in the last 20 years, building a strong industrialised economy which has the largest share of industrial output in the world.

However, according to former Chinese Ambassador to Malawi, Lin Songtian who is now Foreign Affairs Ministry’s Director General for Africa, China now needs to transfer advantageous industries and production capacity to other countries.

“China is willing to share its own experience and outcomes of development with African countries without reservations,” said Lin.

However, Lin was quick to caution against copying Chinese development model since countries have unique situations and cultures hence what works in China might not work in Malawi, for instance.

There is an immediate benefit that China offers, though, which is far more beneficial to help Malawi’s economic transformation.

Industries in China are now experiencing overcapacity. The companies are reaching growth limits and authorities are now taking supply side reforms through the recently adopted 15th five year national plan.

The industry based growth is now maturing. The economy demands service industry based growth and investors are turning attention to high end industrial production with less labour intensive but high technology based.

Deputy Director General in the Department of Foreign Capital and Overseas Investment at the National Development and Reform Commission, Jianjun Wang was asked by the Daily Times on the prospects of Chinese investments to Africa amid the economic slowdown and he was very confident.

“Due to the slowdown of Chinese growth investors are looking for other countries to invest and that is a good opportunity for Africa because of its room for growth and available resources,” he said.

He cited five opportunistic investment areas that Chinese investors could look for which include transport infrastructure, export oriented industries, energy and mining.

Some African countries such as Tanzania have already started benefiting large scale industrial investments with the development of industrial park centred on cotton value chain development, an investment by Jiangsu Overseas Corporation (JOC).

The state owned and one of the companies with largest overseas investment presence expressed interest to enter Malawi as it seeks to expand its footprint through establishment of industrial zones with cotton value chain development as one of the preferred areas.

However, it was learnt at the recent China-Africa Think Tanks conference that Chinese investors are more attracted to countries with success records by other Chinese investors or where there are specially designed industrial zones.

Apart from the internal economic situation, investments from China to Africa will also be pushed by government’s programmes to strengthen cooperation, according to Wang as his government will be implementing massive investment programs in some African countries.

However, Malawi missed out on an opportunity to be one of the countries to host demonstrations and pilot centres of China-Africa cooperation which has Ethiopia, Kenya, Tanzania and Democratic Republic of Congo.

Egypt, Angola and Mozambique will be priority partners for production capacity cooperation while South Africa will work as a locomotive for Chinese initiated industrialisation efforts for Africa. It should be noted that these countries were chosen owing to their readiness to open up competitively to Chinese investors.

“It needs to be emphasized that for these demonstration countries and priority partners, China will pool resources to build demonstration zones and combine the construction of large infrastructure projects such as railway, roads and ports with the building on industrial parks and special economic zones,” Lin told the Think Tanks forum.

Being a landlocked country and small in economic size could be some of factors that disadvantaged Malawi but what China offers in the meantime could be a necessary question worth exploring.

Malawi has a relatively peaceful environment. It has agricultural production capacity and the small size of the economy is exposed to larger regional markets such as Sadc and Comesa.

These factors provide opportunities to attract large scale export oriented investments for export based growth and investors in those commodity markets are the ones that seek new investment destinations from China, following cheap labour and room to grow.However, it takes opening up and not frustrating investors through enduring process such as the case of Bashui Investments which failed to set up a US$6 billion free trade zone in Lilongwe that could have created a beehive of Chinese investments.

Recently, Malawi Investments and Trade Centre said Special Economic Zones are being established in some sites with legislation bills for special tax regimes being drafted.

As Malawi competes with several countries it will take unique conditions to attract more investors to actualise the industrialisation rhetoric and China has a great offer of investors.

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