Integrating BIC Reforms into the PRSP in Malawi

1. Integrating BIC Reforms into the PRSP in Malawi Johannesburg, 25th May 2006 Angela N. Zeleza, Economist Joana Henseler, Economic Advisor Ministry of Economic Planning and Development, MALAWI

2. Presentation Structure • Brief History of PRSP in Malawi • Malawi Growth & Development Strategy • Linkages between the MGDS and BIC/ EE • The role of Public – Private Partnerships in the MGDS • Creating an Enabling Environment for PPP in Malawi

3. Brief History of PRSP in Malawi • Interim PRSP (2001) • Full PRSP: Malawi Poverty Reduction Strategy (2002 – 2005) • Malawi Economic Growth Strategy (2004) • 3 Annual Progress Reports • 1 Comprehensive Review • Malawi Growth & Development Strategy (2006 – 2011) • HIPC Completion Point: most likely summer 2006

4. Malawi Growth & Development Strategy “the overall objective of the MGDS is to reduce poverty through sustained economic growth and development” “The main thrust of the MGDS is to create wealth through economic growth and infrastructure development as a means of achieving poverty reduction. This is expected to transform the country from being a predominantly importing and consuming nation to a predominantly manufacturing and exporting country.” His Excelleny, The State President of the Republic of Malawi

5. Malawi Growth & Development Strategy 5 Themes 1.) Sustainable Economic Growth 2.) Social Protection and Disaster Management 3.) Social Development 4.) Infrastructure 5.) Good Governance

6. MGDS Theme 1: Sustainable Economic Growth Sub-Themes: • Maximising the contribution to economic growth through the sources of growth • Enabling environment for private-sector led growth • Food security • Regional integration • Economic empowerment • Land

7. MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Goal The goal for Malawi is to achieve increasing growth and diversification of business products and economic sectors while increasing the level of foreign and domestic investment and profitable enterprises. Strategy • Address the infrastructure constraints – especially access to reliable and seasonally priced electricity, water and improved inter-modal transport to regional and domestic markets through direct investment, privatisation, and public-private partnerships; • Ensure sustained macroeconomic stability; • Improve vocational training through the current educational system, focusing on improving the TEVET system and updating equipment to meet international certification standards;

8. MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Strategy (continued) • Implement tax reforms; and • Improve coordination for domestic and international investors to resolve problems that they face and to access information. For small and medium scale enterprises, specific strategies will need to be developed, including: • Improving micro-finance schemes and programmes; • Secure land registration and the functioning of land markets; • Ensure Malawians have opportunities for jobs, especially in rural areas; and • Finally, related strategies in health will be coupled with efforts to improve occupational safety and labour protection.

9. MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Implementation • Government will work with all relevant stakeholders including private sector support institutions and interest groups such as MIPA, MCCCI, NAG and other representative organizations to help align policies and programs to address the needs of the private sector • Mechanisms for public-private partnerships will need to be strengthened • Government will focus on public-private partnerships not only for the provision of infrastructure, but also for continuous monitoring of the private sector environment

10. MGDS Theme 2: Social Protection and Disaster Management Sub-Themes: • Protecting the vulnerable • Improving disaster risk management

11. MGDS Theme 3: Social Development Sub-Themes: • Health and Population • Prevent the negative consequences of HIV/ AIDS • Nutrition • Education • Gender

12. MGDS Theme 4: Infrastructure Sub-Themes: • Transportation • Energy • Water supply and sanitation • Information and communication technologies • Science technology, Research and Development

13. MGDS Theme 5: Good Governance Sub-Themes: • Macroeconomic stability • Public policy formulation, expenditure management and corruption • Decentralisation • Developing a strong justice system and rule of law • Security • Corporate governance • Human rights

14. The Role of PPPs in the MGDS Concrete Actions for which Government is planning to engage in PPPs: • Infrastructure for key mining companies (water, electricity, roads) • Rehabilitation and maintenance of port facilities • Electricity supply to name but a few…

15. INFRASTRUCTURE DEVELOPMENT Integrated infrastructure plan Infrastructure Law • Vision for the State • Privatisation Process • Thrust areas • State Support • Shelf of projects • Key Project Risks Identification • Integrated planning • Sector level policy bottlenecks • Infrastructure Authority (Executive body) • Investment requirement & State’s share • Conciliation Board (Quasi - Judicial body) of the investment • Coverage – Infrastructure Sectors • Private Sector Participation (PSP) required Sector Policies § Extent & form of PSP § Stand on identified Risk Issues § Sector specific Incentives § Regulatory Framework § Necessary Legal Enablers Model Concession Agreement § Contractual allocation of Risks, Roles and Responsibilities Creating an Enabling Environment for PPPs

16. State support framework At the minimum ensure service level assurances for prompt approvals and clearances or grounds for denial Decreasing order of Govt. preference: Direct impact on Budget • Timely Approvals; Construction power & water at site • Undertake Resettlement and Rehabilitation measures Administrative Support • Land at concessional prices • Provision of supporting infrastructure for projects • Bundling with suitable projects Land & Infrastructure Support • Tax & Duty incentives (central/ local) • Exemptions from other license and registration fees Tax & Duty incentives Credit Enhancements • Receivables Guarantee, Off take guarantees • Forex guarantees, Credit guarantees, etc. Direct Financial Support • Soft Loans • Grants, Subsidies, etc.

17. Form & extent of PPP PPP extended to all stages of infrastructure development Currently private sector mostly limited to construction through contracts Financing Designing Operating KEY BENEFITS Larger inflow of investment Better service standards Cost and operating efficiencies Lower burden on public finances

18. Zikomo Kwambiri! Thank you very much for your kind attention!