House of Commons International Development Committee The Development Situation in Malawi Third Report of Session 2010–12 Volume II Additional written evidence Ordered by the House of Commons to be published 6 March, 17 and 24 April in previous session of Parliament and 10 May, 13 and 26 June and 10 July 2012 Published on 24 July 2012 by authority of the House of Commons London: The Stationery Office Limited The International Development Committee The International Development Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Office of the Secretary of State for International Development. Current membership Rt Hon Sir Malcolm Bruce MP (Liberal Democrat, Gordon) (Chairman) Hugh Bayley MP (Labour, York Central) Richard Burden MP (Labour, Birmingham, Northfield) Mr Sam Gyimah MP (Conservative, East Surrey) Richard Harrington MP (Conservative, Watford) Pauline Latham MP (Conservative, Mid Derbyshire) Jeremy Lefroy MP (Conservative, Stafford) Mr Michael McCann MP (Labour, East Kilbride, Strathaven and Lesmahagow) Alison McGovern MP (Labour, Wirral South) Fiona O’Donnell MP (Labour, East Lothian) Chris White MP (Conservative, Warwick and Leamington) The following members were also members of the committee during the parliament: Mr Russell Brown MP (Labour, Dumfries, Galloway) Mr James Clappison MP (Conservative, Hertsmere) Ann McKechin MP (Labour, Glasgow North) Anas Sarwar MP (Labour, Glasgow Central) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/indcom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are David Harrison (Clerk), Louise Whitley (Inquiry Manager), Rob Page (Committee Specialist), Anita Fuki (Senior Committee Assistant), Annabel Goddard (Committee Assistant), Paul Hampson (Committee Support Assistant) and Nicholas Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the International Development Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 1223; the Committee’s email address is [email protected] List of additional written evidence (published in Volume II on the Committee’s website www.parliament.uk/indcom) Page 1 Andrew Dorward and Ephraim Chirwa Ev w1: Ev w3 2 Billy Mayaya Ev w6 3 Christian Aid Ev w9 4 Crown Agents Bank Ev w10 5 David James Foundation (DJF) Ev w11 6 Don Osborne Ev w15: Ev w17 7 EveryChild Ev w17 8 Garry Whitby Ev w21 9 Global Humanitarian Assistance Ev w27 10 Exploits University Ev w29 11 Integrated Disaster Management Ev w32 12 Interact Worldwide (IWW) Ev w33 13 Jimmy Kainja Ev w35 14 A Malawi Congress of Trade Unions Ev w37 15 Mark Miller Ev w40: Ev w44 16 Médecins Sans Frontiéres Ev w45 17 Medic Malawi Ev w48 18 Michael King Ev w49: Ev w54 19 Dr Nicholas Wright Ev w55: Ev w56 20 Oxfam GB Ev w57 21 Plan UK Ev w59 22 Pump Aid Ev w62 23 The Scotland Malawi Partnership (SMP) Ev w65: Ev w85 24 Stephen Carr Ev w66 25 Dr Jack Thompson Ev w68 26 Tearfund Ev w71: Ev w73 27 WaterAid Ev w75: Ev w86 28 Wellspring Development Capital Ltd Ev w78 29 Women and Children First, Health Foundation, Institute of Child Health, Maikhanda and Perinatal Care Project Ev w79 cobber Pack: U PL: CWE1 [SO] Processed: [11-07-2012 13:22] Job: 019472 Unit: PG01 International Development Committee: Evidence Ev w1 Written evidence Written evidence submitted by Andrew Dorward and Ephraim Chirwa How can the UK best help to improve opportunities for economic growth, job creation and meeting the Millennium Development Goal targets in Malawi? Executive Summary Malawi faces major long term structural challenges to economic development, and these have been compounded by its recent economic policies and the collapse of tobacco exports. The new government needs to manage difficult adjustments, and establish broad based growth while rapidly finding alternatives to tobacco. The Farm Input Subsidy Programme has the potential to play a major role in both managing short term economic adjustments and welfare needs and stimulating the structural change needed to break out of the “low maize productivity trap” that afflicts millions of poor people and the wider economy. DFID, building on its achievements in the past, can play a critical role in supporting this programme and opportunities for improving its effectiveness and reach in a challenging environment. Biographical Information Andrew Dorward is Professor of Development Economics, School of Oriental and African Studies, University of London. He has long term personal and professional links with Malawi. He started his professional career in agricultural development with a posting to Malawi 35 years ago. He has continued to work in and on Malawi on and off since then, also pursuing wider development interests in other parts of Africa and in Asia and Latin America. His publications include work on Malawi and on wider development processes and policies. Ephraim Chirwa is Professor of Economics, Chancellor College, University of Malawi. His research extends across different sectors of the Malawi economy, but in recent years has focussed particularly on study of the welfare and economic impacts of health, education, agriculture and social protection policies in rural areas. Andrew and Ephraim have together led DFID funded evaluations of the Malawi Farm Input Subsidy Programme since 2006, with biennial household surveys and annual analysis of implementation. They are currently working on a book on Agricultural Input Subsidies in Low Income Countries—the Malawi Experience to be published by the Oxford University Press. Submission 1. The Malawi economy has suffered from major and long term structural imbalances in terms of its heavy reliance on tobacco for trade earnings, its structural trade deficit and reliance on donors for foreign exchange, high rates and severity of poverty, very large numbers of people engaged in maize production with very low land and labour productivity, poor infrastructure, and small industrial and service sectors. 2. These structural imbalances affect the foreign exchange account, government budget, growth opportunities, and vulnerability of the economy to economic and climatic shocks. They also affect the ability of the government to deliver services and infrastructural investment, imposing further constraints on economic and social development. 3. From 2004 to 2009 budget deficits, interest rates and inflation were cut back, while the economy grew and poverty measures fell, and social indicators improved—even allowing for possible optimism in some official figures. This was due to strong and effective macro-economic management, generally good weather for agricultural production, good tobacco prices and improved food security and real wages as a result of the Farm (or Agricultural) Input Subsidy Programme (FISP). 4. DFID played a significant role in these achievements through various channels of support to the government. We note in particular the role of budget support and the strong and imaginative role played by DFID in its support for and influence on the Farm Input Subsidy Programme (see below). 5. From 2009 to early 2012, however, political and economic policies have undermined and reversed the gains of the previous years and exacerbated Malawi’s structural imbalances: tobacco prices and volumes have fallen, aid receipts were frozen, fuel and electricity shortages depressed productivity, prices rose, and government services and investment were cut. 6. The new government faces a daunting set of immediate challenges as it seeks to turn the economy, deal with short term problems, and establish a longer term path for growth and development. While immediate tasks are to realign the exchange rate, recover the ability to finance essential imports, and to manage difficult adjustments, the likely permanent loss of tobacco earnings presents a major challenge. The need to diversify the economy away from its reliance on tobacco is now inescapable. 7. These challenges need to be set in the context of wider processes of change. The Malawi people and their economy face major threats from growing risks of rainfall variability as global climate change intensifies. These threats are intensified by declining soil fertility with current maize cultivation patterns and by rapid cobber Pack: U PL: CWE1 [E] Processed: [11-07-2012 13:22] Job: 019472 Unit: PG01 Ev w2 International Development Committee: Evidence population growth with a predicted tripling of the population by 2050 unless there are major declines in birth rates(National Statistical Office, 2011). There are new and significant prospects for foreign exchange earnings from minerals, but these will take time to come on stream and pose substantial risks—environmental, political and economic—which may lead to limited benefits for the poor and for wider economic growth unless mineral earnings are very carefully managed and invested, initially at least, in agricultural intensification (Poulton and Dorward, 2008). 8. From our long term engagement with the Malawian economy as a whole and with the agricultural sector, and from intensive study of the Farm Input Subsidy Programme (FISP) since 2006, we are convinced that this programme has the potential to play a major role in both managing short term economic adjustments to reduce both short and long term welfare and economic damage to the majority of Malawi’s people, and to stimulate long term processes of broad based and more resilient growth.