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| Business |
| Government, chamber differ on trade balance |
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by
Ephraim Munthali, 29 October 2003
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17:05:08
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The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has said the country’s trade balance will widen even further this year, due to low tobacco and manufacturing output.
But director of commerce Harrison Mandindi has said he expects the gap to narrow because of textile exports to the United States through Agoa and the Sadc Trade Protocol on textile and clothing which enables Malawi to export duty-free to South Africa, the region’s biggest economy.
“For us to improve our trade balance, we must produce more goods for exports but when some producers close shop while others cut the capacity of their operations, we cannot reduce our trade balance.
“To make matters worse, tobacco exports fell by 5 percent during the same year yet it is our major export product, do you think there can be a chance of closing the trade balance?” Wondered MCCCI chief executive Chancellor Kaferapanjira.
Last year, the trade gap rose to US$210 million from US$175 million, raising fears among trade analysts that the local economy is becoming the trading centre of other nations.
Mandindi said that the imbalance is largely caused by Malawi’s trade with Southern Africa Development Community (Sadc) countries, particularly South Africa.
Last year, the trade balance with Sadc alone was US$230 million after the country registered an export value of US$108 million against imports worth US$339 million.
He said even if Malawi has the power to export into the Sadc region, the efforts are being hampered by quota and non-tariff barriers and rules of origin conditions but insisted that the situation is improving.
He explained that the positive balance the country has attained with Comesa through the Free Trade Area (FTA) will also help reduce the overall imbalance.
Experts say Malawi has several constraints that affect the growth of trade. One of them, they say, is the landlocked location of country which results in high transport costs and long lead times for its imports and exports.
They add that the country’s small domestic market has limited disposable income which reduces the opportunity for creating a strong domestic base for exporters.
They add that inappropriate and old technology and limited access to trade investment finance at high cost has made many of Malawi’s products uncompetitive in the regional export markets.
Poor trade facilitation, transport and business infrastructure, lack of a clear trade strategy and high level smuggling also contribute to the decimal trade receipts.
Government has pledged to expand the export market, create an environment for trade and effective competition, negotiate for preferential arrangements and other solutions to the identified constraints.
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