Malawi should target urban markets in trading partner countries if it is to increase the lifespan of its exports and boost economic growth, a new study has shown.
The study, published in the Journal of Industry, Competition and Trade, finds that spatial concentration of economic activities in importing countries reduces the risk of export failure by approximately 4.5 percentage points.
University of Malawi-based researchers Tadala Banda and Farai Chigaru analysed Malawi’s export data from 117 trading partners over 20 years, from 2003 to 2022, using a shared frailty survival model to understand what keeps exports alive in foreign markets.
The findings reveal that many developing countries, including Malawi, struggle with short-lived export spells, with products disappearing from foreign markets after brief periods.
Increasing the lifespan of existing exports is described as a cost-effective way of maintaining export contribution to economic growth, especially for countries that are facing institutional challenges.
- Advertisement -
“Agglomeration significantly enhances the survival of Malawi’s exports. This effect remains robust across different trading partner samples and is particularly pronounced in sub-Saharan African destinations,” the study indicates.
The researchers recommend that policymakers prioritise trade promotion efforts toward markets with higher agglomeration levels, particularly urban centres in trading partner countries.
Banda said export promotion agencies should develop targeted strategies for penetrating densely populated urban markets where clustering effects create more stable demand and better infrastructure.
“This might involve sector-specific trade missions to major metropolitan areas, participation in urban-focused trade exhibitions and development of distribution networks that leverage agglomeration economies,” Banda said.
- Advertisement -
- Advertisement -
The study also reveals substantial heterogeneity in export survival across destinations and product types, highlighting the importance of strategic market targeting.
While agglomeration provides benefits even in weak institutional environments, Chigalu said combining market density with strong institutions yielded optimal results.
He said Malawi should, therefore, prioritise trade agreements and partnerships with countries that demonstrate both high agglomeration and strong institutional quality.
“Regional integration efforts within sub-Saharan Africa should emphasise harmonisation of trade regulations, improvement of cross-border infrastructure and strengthening of contract enforcement mechanisms to amplify the benefits of existing spatial concentration.
“We noted dramatic learning effects, indicating that temporary export failures should not discourage continued market engagement. Government should provide targeted incentives including export credit guarantees that cover re-entry costs, mentorship programmes pairing experienced and novice exporters, and market intelligence services providing real-time information on partner country conditions,” Chigalu said.
He added that the significant negative effects of distance highlight the importance of reducing transaction costs.
“Policy interventions should include investment in trade facilitation infrastructure, particularly for landlocked Malawi, development of export logistics hubs and consolidation centres, and training programmes to improve exporters’ language skills and cultural competence,” Chigalu said.
In an interview, Economics Association of Malawi (Ecama) President Bertha Chikadza said targeting foreign urban markets was not only desirable but empirically justified as a survival-enhancing strategy for Malawian exports. She said when Malawian exporters manage to access large, dense urban centres such as Johannesburg [South Africa], Nairobi [Kenya], Dar es Salaam [Tanzania], Lusaka [Zambia], and Lagos [Nigeria], they benefit from thicker demand, better distribution networks, lower information and matching frictions, and greater scope for relationship learning and repeat transactions.
