Review of Food and Agricultural Policies in Malawi Country Report 2014
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Review of food and agricultural policies in Malawi Country Report 2014 Monitoring and Analysing Food and Agricultural Policies (MAFAP) Front cover photo: ©FAO/Amos Gumulira. Review of food and agricultural policies in Malawi Country Report 2014 FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS ROME, 2015 Recommended citation: FAO, 2015. Review of food and agricultural policies in Malawi. MAFAP Country Report Series. Rome, Italy The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by FAO in preference to others of a similar nature that are not mentioned. The views expressed in this information product are those of the author(s) and do not necessarily reflect the views or policies of FAO. © FAO, 2015 FAO encourages the use, reproduction and dissemination of material in this information product. Except where otherwise indicated, material may be copied, downloaded and printed for private study, research and teaching purposes, or for use in non-commercial products or services, provided that appropriate acknowledgement of FAO as the source and copyright holder is given and that FAO’s endorsement of users’ views, products or services is not implied in any way. All requests for translation and adaptation rights, and for resale and other commercial use rights should be made via www.fao.org/contact-us/licence-request or addressed to [email protected]. FAO information products are available on the FAO website (www.fao.org/publications) and can be purchased through [email protected]. Contents ACKNOWLEDGEMENTS VIII ACRONYMS IX EXECUTIVE SUMMARY XI INTRODUCTION, METHODOLOGY AND DATA CONSTRAINTS XI MAIN FINDINGS XI RECOMMENDATIONS XIII INTRODUCTION 1 PART 1. FOOD SECURITY AND AGRICULTURAL POLICY CONTEXT 3 1. MALAWI IN BRIEF 3 2. GEOGRAPHICAL CONTEXT 6 3. SOCIO-ECONOMIC ASPECTS 7 4. AGRICULTURAL POLICY FRAMEWORK IN MALAWI 21 4.1 RECENT POLICY DEVELOPMENTS 24 PART 2. THE EFFECTS OF AGRICULTURE AND FOOD POLICIES 29 5. INCENTIVES, DISINCENTIVES AND MARKET DEVELOPMENT GAPS 29 5.1 HiGHLIGHTS OF THE METHODOLOGY 29 5.2 COMMODITIES SELECTION 32 5.3 DATA INPUTS AND SOURCES 34 5.4 INDICATORS OF EFFECTS OF INCENTIVES OR DISINCENTIVES 37 5.5 RESULTS BY COMMODITY 40 MAIZE 40 GROUNDNUTS 46 TEA 51 TOBACCO 56 SUGAR 62 COTTON 68 5.6 AGGREGATE INDICATORS 74 NOMINAL RATE OF PROTECTION 75 MARKET DEVELOPMENT GAP 78 NOMINAL RATE OF ASSISTANCE 79 6. PUBLIC EXPENDITURE AND AID 80 6.1 PURPOSE OF THE ANALYSIS AND METHODOLOGY 80 6.2 SCOPE OF THE ANALYSIS 82 6.3 ANALYSIS OF PUBLIC EXPENDITURES IN SUPPORT OF FOOD AND AGRICULTURE IN MALAWI 83 GENERAL TRENDS IN THE GLOBAL BUDGET 83 GENERAL TRENDS OF PEFA 84 COMPOSITION OF PEFA 89 AgRICULTURE-SPECIFIC PUBLIC EXPENDITURES 91 AgRICULTURE-SUPPORTIVE PUBLIC EXPENDITURES 97 PUBLIC EXPENDITURES ON KEY COMMODITIES 98 NATURE OF PEFA 104 ROLE OF DEVELOPMENT AID IN PEFA 105 6.4 CONCLUSIONS AND RECOMMENDATIONS ON PUBLIC EXPENDITURE ANALYSIS 110 7. COHERENCE BETWEEN INCENTIVES AND POLICY OBJECTIVES 111 7.1 METHODOLOGY AND APPROACH 112 7.2 ASSESSING COHERENCE BETWEEN OVERALL DEVELOPMENT OBJECTIVES AND POLICIES 113 7.3 POLICY COHERENCE WITHIN THE FOOD AND AGRICULTURE SECTOR 115 ANNEXES 119 REFERENCES 129 WEBPAGES AND DATABASES CONSULTED 132 Figures Figure 1. Map of malawi 6 Figure 2. Food security status by population groups (2011)* 9 Figure 3. Average GDP Contribution by Sector, 2005–2013 10 Figure 4. Malawi’s GDP annual growth 11 Figure 5. Malawi´s balance of trade 12 Figure 6. Official Exchange Rate (annual average) 12 Figure 7. Malawi annual consumer price index 13 Figure 8. Malawi’s Government Revenue (Millions of MWK), 2005–2013 14 Figure 9. Malawi’s Agricultural GDP annual growth 15 Figure 10. Top Agricultural Products by Gross Production Value (constant 2004–2006, average 2005–2012 16 Figure 11. Volume of production and area harvested, average 2005–2012 16 Figure 12. Agricultural Trade Balance 17 Figure 13. Total Exports Composition 18 Figure 14. Total Import Composition 18 Figure 15. Main policy frameworks and rural and agricultural policies 22 Figure 16. Map of COMESA (left) and SADC member countries (right) 25 Figure 17. Maize Production, Yield and Area in Malawi 41 Figure 18. Observed and Adjusted Nominal Rates of Protection at Farm Gate and Point of Competition for Maize in Malawi 43 Figure 19. Market Development Gap for maize in Malawi 44 Figure 20. MAFAP Observed and Adjusted Nominal Rates of Assistance at Farm Gate for Maize in Malawi 45 Figure 21. NASFAM and total national export in Malawi (Tonnes) 47 Figure 22. Domestic Price vs. Observed and Adjusted Reference Prices at farm gate for groundnuts in Malawi 48 Figure 23. Observed and Adjusted Nominal Rates of Protection at Farm Gate for Groundnuts in Malawi 49 Figure 24. Composition of Market Development Gap for groundnuts in Malawi 50 Figure 25. Auction, FOB and Farm Gate price comparison for made tea in Malawi 53 Figure 26. Domestic Price vs. Observed Reference Prices at Farm Gate for Black Tea in Malawi 54 Figure 27. Observed and Adjusted Nominal Rates of Protection at Farm Gate for Tea in Malawi 55 Figure 28. total production, area and yeild of tobacco in Malawi 57 Figure 29. Observed and Adjusted Nominal Rate of Protection for tobacco in Malawi at point of competition and farm gate 59 Figure 30. Composition of the Market Development Gap for tobacco in Malawi 60 Figure 31. Observed and Adjusted Nominal Rate of Assistance for tobacco in Malawi 61 Figure 32. Yield, Production and Area harvested of sugarcane in Malawi 63 Figure 33. Price trends of Sugar for Malawi FOB, World (Brazil), EU and United States 63 Figure 34. Sugar Trade Volumes by Top 5 Destination Countries and share of exports of Malawi 64 Figure 35. Domestic Price vs. Observed and Adjusted Reference Prices at Farm gate for Sugar in Malawi 65 Figure 36. Observed and Adjusted Nominal Rate of Protection at Farm Gate for Sugar in Malawi 66 Figure 37. Market Development Gap for Sugar in Malawi 66 Figure 38. Observed and Adjusted Nominal Rate of Assistance at Farm Gate for Sugar in Malawi 67 Figure 39. Production, area cultivated and yields of cotton in Malawi 68 Figure 40. Value of cotton lint exports not carded or combed in Malawi and international price of cotton from the Cotlook A Index 69 Figure 41. Observed and adjusted nominal rate of protection at farm gate for Cotton in Malawi 72 Figure 42. Composition of the Market Development Gap for cottonseed in Malawi 72 Figure 43. Observed and Adjusted Nominal Rate of Assistance at farm gate for cotton in Malawi, 2005–2013 73 Figure 44. Average share by commodity on the total value of production for the commodities analysed (above) and average share of export commodity on the total value of production for the export commodities analysed (below), average 2005–2013 74 Figure 45. Average Observed and Adjusted NRPs for the six commodities in Malawi 76 Figure 46. Average Observed and Adjusted NRPs for export commodities in Malawi 77 Figure 47. Composition of Market Development Gap for export commodities and maize 79 Figure 48. Observed Nominal Rate of Protection and Observed Nominal Rate of Assistance (left) and Adjusted Nominal Rate of Protection and Adjusted Nominal Rate of Assistance (right) for agricultural sector in Malawi 80 Figure 49. Total public expenditures in Malawi 83 Figure 50. Total Official Development Assistance to Malawi* 84 Figure 51. Total actual disbursement of on-budget donor support* 85 Figure 52. Budgeted and actual PEFAa 86 Figure 53. Budgeted and actual PEFA per source of funding 87 Figure 54. Actual MoAFS expenditure and other actual expenditure (left axis), and share of MoAFS expenditure over the total government expenditures (right axis) 87 Figure 55. Budgeted and actual PEFA within total public expenditure 88 Figure 56. Agricultural value added, GDP growth, agricultural value added and PEFA 89 Figure 57. Composition of PEFA 90 Figure 58. Composition of agricultural specific public expenditures 92 Figure 59. Composition of expenditures allocated to agents of the food and agricultural sector 93 Figure 60. Composition of expenditures allocated to payments to producers, average 2006–2013 93 Figure 61. Expenditures allocated to variable inputs in absolute terms, as a share of agriculture specific expenditures and as a share of total food and agriculture expenditures 94 Figure 62. Composition of general support to food and agriculture 95 Figure 63. Agricultural research spending from ASTI and from MAFAP in absolute value (left axis) and as share of agricultural GDP (right axis) 96 Figure 64. Composition of expenditures allocated to agricultural infrastructure, average 2006–2013 97 Figure 65. Composition of rural infrastructure expenditures, average 2006–2013 98 Figure 66. Composition of agriculture specific expenditures 99 Figure 67. Public expenditures allocated to single commodities* 99 Figure 68. Expenditures allocated to variable input subsidie 100 Figure 69. Public expenditures allocated to single commodities except maize 101 Figure 70. Composition of the support to the cotton sector, average 2008–2013 101 Figure 71. Average volume of production, average expenditures allocated per commodity, number of project or programmes targeting each commodity*, average 2006–2013 102 Figure 72. Public expenditures allocated to group of commodities* 103 Figure 73. Composition of expenditures allocated to livestock, average 2006–2013 103 Figure 74. Composition of PEFA: policy transfers vs.