Transcript SAFETY NETS PROGRAMS
Malawi Competition Regime
• 7UP3 project will be undertaken by the Centre for Social Research (CSR) – a research arm of the faculty of social science in the University of Malawi • CSR is enthused to be part of this regional project because it is in line with its mandate and strategic plan • So far, there has been little work done in this area. This project gives CSR a chance to add a new dimension to its profile
• Some groundbreaking work on the PCP areas was done by CAMA and CUTS. The work was published by CUTS in 2003 under the title “Spine Chilling Experiences of Anti-Competitive Practices in Malawi” • CUTS has continued to follow events in Malawi which enabled produce some updates on Malawi • With my spine chilled, I was unable to match their work in so short a period • Their work will form the basis for the Malawi’s Study as some attempt will be done to update some of the areas • The following slides provide some notes for the PCP
• Malawi became a British Protectorate in 1891, politically independent in 1964, a republic in 1966, one party-state in 1971 • A referendum in 1993 did away with the one-party system and a new republican constitution was adopted in 1995 • Multiparty general elections have been held three times since then (1994, 1999 and 2004) • Central Government dominates public administration. Low priority is given to local government.
Local Government elections were held only once in 2000. None are in insight • Judicial system functions fairly well and independently especially since the new constitution although it is poorly funded to deal with cases expeditiously • Traditional leadership still play major roles in the Malawi in both public and justice administration • Economic management since SAPs has leaned more towards the market – exposing domestic firms to fair and unfair competition and consumers to the benefits and ills of free marketing • Malawi is yet to gain full economic independence. She is very poor.
• Malawi lies at the end of the Great Rift Valley and is sandwiched between Mozambique (SE), Tanzania (NE) and Zambia (West) • It sits on 119 thousand sq km and accommodates a rising population (1.9%) of just over 12m in 2005; 65% of which are classified as poor • Agriculture is her mainstay – it accounts for over 35% of GDP and gives something to do for 80% of the labour force • Unemployment ‘does not exist’ on the assumption that the unemployed have the (hard?) choice of being self-employed as subsistence farmers • Some more facts on the following table
Indicator
GDP Per Capita (US$) Population in millions Population below poverty line (%) Population without food 4-6 months before harvest (%) Population (rural) with chronic food insecurity (%) Population unable to satisfy their basic calorific needs (%) Adult literacy (%)
Male
Female Combined primary, secondary and tertiary GER (%) Life Expectancy at birth (years) Population expected to live up to 40 years (% of cohort) Infant mortality rate (number per 1,000 live births) Under-5 mortality rate (number per 1,000 live births) Maternal mortality rate (number per 100,000 live births) HIV/AIDS prevalence rate (% of the 14-49 age group)
Value
170 12 65.3 50 55 40 61
75
48 72 38.5 41.4 114 2001 2001 2000-5 2001 183 2001 1100 1985-2001 14.4 2003
Year
2002 2005 1998 2000 2000 2000 2001
• The country has a weak economic structure and requires a genuine structural transformation. This is despite the adoption of SAPs since 1981 • In 2004, 39% of GDP was generated from Agriculture. Manufacturing was 14% and has been declining from a high of 18% achieved in 1995 • Distribution has filled the gap created by the shrinking manufacturing sector. Its share has increased from 13% up to 1994 and 22% since 1995 • GDP growth has rarely been stable • Figures 1 and 2 depict the story visually
Figure 1: GDP Sectoral Shares Since 1980
100% 80% 60% 40% 20% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Smallscale agriculture Largescale agriculture Manufacturing Distribution Services
Figure 2: GDP Growth since 1980
15 10 5 -10 -15 0 -5 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
• The import-substitution policies in the years up to 1980 forced government to protect the infant and the vulnerable consumer • High import duties and price controls were the tools. Competition was not encouraged and inefficiency characterised the Malawi’s economy • SAPs opened borders and freed markets in the quest to promote competition, force efficiency and deliver benefits of the consumer. • However, no genuine competition came. What came instead were slow death of ‘manufacturing infants’ caused by fair and dumped imports and consumer exploitation by SAP-freed monopolies/oligopolies as the small local market and concessions restricted entry • Some competition has been witnessed in imports covered sectors. Privatisation has not helped either.
• As part of the reforms under SAPs, the Ministry of Trade and Industry turned from being a regulator into a facilitator of competition • Further, Malawi introduced a host of competition enhancing policies namely (i) investment promotion (ii) integrated trade and industry (iii) micro and small enterprise (iv) micro finance policies and ultimately (v) competition and fair trading. • Most of the key policies have been underlined by legislation. The critical ones being the competition and fair trading and the Consumer Protection Acts • Government (GCU) and public enterprises procurement policies also require competitive tendering for purchases of goods and services to promote competition among suppliers
Nature of market
• Relatively, there is competition in the consumer goods, edible oils, soaps and household durable goods markets. In these sectors, domestic production is supplemented by imports • There are certain sectors that have limited competition like the sugar, beer and soft drinks, motor vehicle genuine spares despite market liberalisation • Naturally, utilities face no competition. Competition in the distribution of utilities is still not in sight • In some sectors like financial services and insurance there is some market concentration although there is some improvement especially in the retail banking • Serious ‘investigations’ are required to understand the continued limited competition and exploitation of the consumer, especially in the rural areas
• Uncompetitiveness of local firms is evidenced by the closure of manufacturing firms, shrinking manufacturing sector and blossoming distribution sector, in terms of their value-added • Local firms point at ‘the deaths of their friends’ and loudly call for protection against what they consider unfair competition. • Dumping (and not fair imports) is blamed for local firms’ struggles and closures • Further, high import content of the locally produced products make local firms uncompetitive • Literature review or primary critical analysis is required in this area to establish some credible explanation
• There are no restrictive legislative barriers • There are very few administrative barriers in some sectors where concessions are granted to attract investors • There are natural barriers for foreign investors – landlockedness, quality of human resources especially semi-skilled, size of the economy (poverty) • Alleged corruption and misuse of donor funds has not helped in the attraction of investors and donors • Further, poor economic management fuelled inflation and too high interest rates. There was virtually no investment by both domestic and foreign investors • All these have acted as barriers to entry
• Government enacted the Competition and Fair Trading Act in 2000 • The law has most of the necessary provisions • The law has adequately dealt with the dominant firm, collusions and price fixing associations, mergers and acquisition and monopolies and oligopolies • Its has provided for a competition authority • It is not as comprehensive as the competition policy. It doesn’t deal with dumping adequately. • What is more spine chilling is that five years have gone without the ‘teeth of the Act’ (the Competition Commission) with lack of planning and resources as possible excuses
• A very good Consumer Protection Act was enacted in 2003 and it provided for the establishment of Consumer Protection Council • The Council would protect consumers from a host of unfair trading practices and seek compensation • The law covers most of the key consumer protection issues although local firms are not featured as consumers.
• However, serious or more ‘holes’ could only be uncovered during implementation.
• Unfortunately, the Council is yet to be established.
• We are hopeful that the new government, led by former COMESA ED, will pick up the issue
Some concluding remarks
• Policies and legislation for the promotion of competition and protecting consumers exist in Malawi • What are missing are the Competition Commission and Consumer Protection Council both of which have been provided for in the Malawi Laws • Lack of implementation is the biggest plague in Malawi. Apparently competition and consumer protection are never been priorities • This project will try to find reasons why these two related issues are given low priority • This project will show that the civil society is still interested