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Malawi service export dismal despite GDP dominance

Malawi exports for services—non tangible products, which include telecommunications, freight, financial and insurance—are expected to perform poorly regardless of the sector contributing over half to the country’s gross domestic product (GDP).

Reserve Bank of Malawi (RBM) Balance of Payment (BoP) figures show that this year, the country will only export $115.9 million (about K52 billion) in services and import about $293.6 million (K132 billion), although the sector contributes over half to the country’s GDP—the broadest measure of a country’s economic performance.

Reserve Bank of Malawi
Reserve Bank of Malawi

Comparatively, the country will export $1.6 billion (K720 billion) in tangible goods and import $3 billion (K1.3 trillion) this year, according to RBM.

Specifically, Malawi is expected to export $4.6 million (K2 billion) in passenger services, $7.8 million (K3.5 billion) in freight and air transport $7.7 million (K3.4 billion) this year.

The country is also expected to export $21.8 million (K13 billion) in business travel services, $15 million (K7 billion) in personal travel and $27 million (K12 billion) in communications.

But analysts, including the World Trade Organisations (WTO) have often argued that landlocked countries such as Malawi should rely more on trade in services in contrast to trade in goods.

WTO chief of staff Arancha Gonzalez, in a statement, noted that the services sector is vital to trade, especially to landlocked countries.

He said one of the key findings is that services play a greater role in international trade than previously thought and argued that landlocked countries must pay attention to the sector unlike manufacturing and agriculture, which are affected by being landlocked.

Ministry of Industry and Trade spokesperson Wiskes Nkombezi, while acknowledging the importance of exports of trade in services, noted that government is doing a lot to promote the sector.

He said government would like to have trade in services come out clearly in the revised trade policy and, was at the same time, negotiating with members of trade blocs, including the Southern Africa Development Community (Sadc) and Common Market for Eastern and Southern Africa (Comesa).

Compared to neighbouring countries, Malawi has also been underperforming in terms of trade in services.

According to WTO data, Malawi lagged on trade in services compared to its neighbours, having exported $75 million (K33.8 billion) in 2012, signaling the need to do more to create jobs and earn foreign exchange.

WTO international trade statistics 2013 indicate that Malawi’s total exported commercial services comprised 35.9 percent transportation, 44.9 percent travel while 19.3 percent were fetched by the rest—tourism, telecommunication, energy and finance.

In the services sector, Malawi has 11 commercial banks, of which only FMB has a subsidiary in Botswana, in telecommunications Airtel Malawi is a multinational while in insurance, it is only Malawi Stock Exchange (MSE)-listed financial services group Nico Holdings Limited has footprints in Zambia, Mozambique, Uganda and Tanzania.

Against an incessant trade deficit, in 2012 government launched the National Export Strategy (NES) whose goal is to match long-term export and import trends.

NES is aimed at providing a clearly prioritised road map for building Malawi’s productive base to generate sufficient exports to match the upward pressure on Malawi’s imports.

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One Comment

  1. Malawians companies are afraid of venturing outside of Malawi borders. They have fear of unknown.

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