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Malawi FDI inflows on the decline—UN

Inflows of foreign direct investment (FDI) into Malawi continue to exhibit a high degree of volatility, a situation trade experts say means the country is not that attractive to foreign investors.

United Nations Conference on Trade and Development (Unctad) data shows that FDI inflows to the country continue to fluctuate, with figures showing that from $77 million (about K134 billion) in 2018, the inflows peaked at $252 million (about K441 billion)  in 2020 and then eased to $206 million (about K361 billion) at the end of 2023.

The data, contained in the World Investment Report, also shows that at $1.6 million (about K2.8 billion), Malawi’s FDI stock is below that of peers South Africa at $124 million (about K217 billion), Mozambique at $57 million (about K99 billion), Zambia at $15 million (about K26 billion) and Zimbabwe at $7 million (about K12 billion).

In a statement accompanying the report, Unctad secretary general Rebecca Grynspan said geo-economic fragmentation is reshaping the landscape of global investment, creating both obstacles and isolated opportunities with some countries benefiting from investments in global value chain-intensive manufacturing while others struggle to participate in the global economy.

Commenting on the report, National Working Group on Trade Policy chairperson Frederick Changaya said in an interview yesterday that while the small market size for Malawi and endowment levels of natural resources does not help matters, the economic environment has made it even worse to attract more FDIs.

He said: “High interest and inflation rates are bad for FDI as they are inversely proportional to inflation while interest rates and foreign exchange unavailability scare FDI in terms of profit and other expropriation.

“Malawi, as a small economy, reduces the attractiveness.  This goes together with policy [trade and fiscal] commitment or lack of it which scares FDI.”

Changaya, who is also Applecore Grain and Milling Limited managing director, said after joining the African Contental Free Trade Area, a market of $3.4 trillion gross domestic product and connecting 1.5 billion people across 55 countries, the country will be a destination of goods and services from Africa, which could worsen trade terms.

The drop in FDI comes at a time Malawi has been on a drive to increase FDI flows through Malawi Investment Forums, among others.

Malawi operates a one-stop service centre and provides after-care services to investors through the Malawi Investment and Trade Centre (Mitc)

Mitc also works with the Ministry of Lands in securing land parcels that can be availed to investors.

In its recent Country Private Sector Diagnostic Report, the World Bank said Malawi has one of the lowest investment rates in the region in part due to exogenous factors

The global multilateral lender said Malawi’s landlocked status, small population and minimal purchasing power make attracting foreign investment a challenge.

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