Malawi Investment and Trade Centre (Mitc), the country’s one-stop investment hub, says government will sign two trade -related agreements—taxation and investment protection agreements—during its mission to the United Arab Emirates (UAE).
Trade experts say Double Taxation Agreements (DTA) and Investment Promotion and Protection Agreements (IPPA) facilitate trade.
Mitc public relations manager Deliby Chimbalu, in an e-mailed response to questions on Thursday, said because Malawi is seriously considering the UAE as a business partner, the agreements will increase the comfort level of the investors by assuring fair treatment in disputes.
“Malawi will be receiving a lot of investments from the UAE. The agreements will encourage the UAE investors to come to Malawi and invest as they will be sure that their interests and investments are protected.
“Absence of a DTA and IPPA with a potential partner discourages trade between the two nations by increasing the cost of doing business through double taxation and discourages investment in either State,” she said.
But trade analysts have argued that although DTAs promote investments and facilitate international trade, some business operators may abuse such where the system is slack and lacks transparency.
The analysts contend that businesses may engage in tax avoidance practices, including transfer pricing where foreign companies over-price their goods and, therefore, transfer profits in form of sales margins while other investors may also undervalue their profits using accounting techniques.
Apart from the forthcoming agreement, Malawi in September 2012 signed a DTA with Seychelles and has an existing agreement with the Netherlands which the Ministry of Finance, Economic Planning and Development earlier said was due for review.
Commenting on specifics of the trade and investment opportunities for Malawi in the UAE, Chimbalu said the local private sector interested to be part of the delegation will submit information regarding their nature of interest in the UAE.
But according to a pre-mission exercise conducted in May 2014, Malawi’s opportunities in the UAE include both trade and investment.
Chimbalu said because the UAE is a desert, imports from Malawi would include agricultural and forestry products.
In terms of investment opportunities, she said they include mining, manufacturing, tourism and hospitality, agriculture and agribusiness, agro-processing, health care and oil and gas.
Commenting on the previous performance of such a mission, Mitc said the response has been encouraging noting that in March this year, a mission to China managed to get an investment pledge of close to $6 billion to construct an airport city in conjunction with Airport Development Limited (ADL) at Kamuzu International Airport (KIA).
The United Nations Conference on Trade and Development (Unctad) 2014 Investment Report showed that Malawi underperformed in the attraction of Foreign Direct Investment (FDI) in 2013.
The country attracted about $118 million, approximately 10 percent lower than the previous year’s level of $129 million, which is less than one percent of the total FDI inflows in southern Africa.
According to the report, neighbouring Mozambique attracted $5.9 billion, Zambia $1.8 billion while Tanzania lured $1.9 billion.