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When FDI means foreign direct importers!

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For a country that has for the last 20 years been striving to move from an economy based on imports to a diversified export-oriented economy, it is incomprehensible that there is no industrial policy in place.

If Malawi has to move beyond exporting raw agricultural commodities like tobacco, tea and pulses, the country needs to industrialise its economy; industrialisation that goes beyond the simplicity of packaging and sorting agricultural commodities and putting them into labelled packages.

The industrial strategy needed in this country should go beyond trading. What this country needs in terms of foreign direct investment (FDI) is not the type of Shoprite or Spar. To be honest, what added value do these shops bring into the country? The type and levels of jobs created by Shoprite, Spar and Kentucky Fried Chicken is a mockery of FDI. It is high time those responsible for attracting FDI moved beyond inviting traders who will fill their shops with imported groundnuts, oranges, tomatoes and even vegetables. These traders, who masquerade as investors, do not manufacture anything in Malawi, do not buy from our local farmers and do not even invest their profits in any value-adding secondary services. Instead, they are putting pressure on the Malawi kwacha by increasing the import bill while externalising their profits to their shareholders in their home countries. Let us for once differentiate foreign director investors from direct foreign investors.

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A productive economy is one that is based on solid manufacturing. A well-planned industrial policy will enable the country to focus on areas where there is a comparative advantage and develop the value chain along that line. Malawi has not had a comprehensive industrial policy, which means that the nation in its quest for development has no sectoral policy direction. There is no comprehensive energy policy to guide the nation on where investments are needed in line with industrial development. Could this be the reason every successive government usually dumps the predecessor’s effort to industrialise?

This is why there is no continuity in polices that can truly move this nation from an importing economy, from a place where every foreigner can come and pretend to be an investor when all they do is trading in commodities that even Malawians can import. How can we call a foreigner who comes into the country and starts a business of importing kaunjika (second-hand clothes), an investor who deserves incentives like tax breaks and tax holidays? A Chinese shop owner claims incentives to start a shop that sells toothpicks and different types of aphrodisiacs is surely not a strategic investor. However, without a guiding industrial policy, it is difficult for the public officials to make strategic decisions on who should be given the benefits of a foreign investor.

In the past few years, there have been efforts to attract FDI into Malawi. While this is commendable, officials have gone into drive gear for the sake of it without stating its goals, programmes, the needs the industries were to meet and their linkage effects. In the process, instead of promoting light industries in the country, the efforts have led to the type of foreign investors who are importing tomatoes, mangoes and toothpicks. We all know that Malawi has a weak production base, yet they embraced foreign traders who further weaken the already weak manufacturing base. In the name of attracting FDI, the gates are now wide open to all manner of goods. Foreign traders (not investors) have taken advantage and flood the country with their cheap and inferior products. This high level of dumping of products into Malawi will surely kill the few existing manufacturing companies. Non-strategic FDI will in the long run lead to the de-industrialisation of the country.

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Malawi had once vibrant textile industry and today the country cannot manufacture proper garments despite being a producer of cotton. The process of de-industrialising Malawi will continue to take root after 52 years of independence due to lack of a comprehensive industrial or manufacturing policy. Is it not shameful that Malawi is exporting raw materials and importing the same back in finished products at higher price level? In order to stop this haemorrhaging of foreign exchange, the country needs a long-term industrial policy that no government that comes to power will change overnight. If Malawi is to progress, value-added production with priority on local content must be encouraged as a matter of policy and strategy. Any industry that is to be set up that has low local content should not be allowed. This is where an industrial policy is urgently needed. Can those in authority rise to the occasion and give Malawi a national industrial policy?

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