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close this bookThe Courier N 152 - July - August 1995 - Dossier: NGO's - Country Reports: Belize, Malawi (EC Courier, 1995, 104 p.)
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close this folderMalawi
View the documentA much happier country
View the documentConsolidating democracy: strengths and weaknesses
View the documentPolitical manoeuvring and tribal divisions
View the documentInterview with president Bakili Mulizi
View the document'MCP not guilty' - An interview with Gwandaguluwe Chakuamba-Phiri, Vice - President of the Malawi Congress Party
View the documentBanda: the making of a despot
View the documentMalawi's transition to democracy
View the documentPoverty alleviation: 'it has to get worse to get better'
View the documentPalaces for sale
View the documentThe EU and the Mozambican refugees in Malawi
View the documentEU-Malawi cooperation - Linked to changing needs

EU-Malawi cooperation - Linked to changing needs

by Jurgen Lovasz

Malawi has been associated with the European Community since the entry into force of the first Lomonvention in 1976. Until the beginning of the 1990s, the cooperation was of a financial and technical nature. Since then, the political dimension has become an important part of the relationship.

Community development assistance to Malawi under Lom-IV is principally given in the form of financial support and technical expertise funded from the EDF. Besides receiving grants under the four National Indicative Programmes (NlPs), Malawi is benefiting from support under the Structural Adjustment Facility, regional cooperation, emergency aid instruments and Stabex, together with risk capital and interest subsidies managed by the European Investment Bank. Activities financed in Malawi under the Community budget (i.e. outwith the Lomonvention) are, in particular, for cofinanced projects together with NGOs, food aid and, more recently, for the ongoing democratisation process.

The overall total assistance allocated to Malawi by the European Community amounted to about ECU 529 million (excluding regional and EC budgetary support) up to the end of 1994. In addition, 440 000 tonnes of food aid was provided to Malawians and refugees from Mozambique.

The provision of Community assistance to Malawi under the Lomonventions has always been linked to the development needs of the country. These needs have changed over the last 20 years and the programming has had to adapt accordingly.

Lom

From the time of independence until the end of the 1970s, Malawi experienced strong economic growth. GDP grew in real terms by an average of more than 6% and in per capita terms by 3% annually. This impressive performance was due to substantial increases in agricultural output thanks to the timely availability of inputs and credit, the expanded provision of extension services and increased research activity. The increased output not only provided an export base but also fuelled the expansion of secondary sectors such as manufacturing. Total productive activity also benefited from the balanced development of basic infrastructures, notably roads, railways and public utilities.

Community assistance under Lom (1975-80) supported this development with an emphasis on increasing agricultural production and the incomes of smallholders in the fields of tobacco and coffee. In the fisheries sector, development activities concentrated on boosting fish supplies to improve the nutritional status of the population, in particular in the Lakeshore are. From a total NIP of ECU 67.9m, 32% was devoted to agriculture and fisheries. A further 25% was allocated to the energy/industrial sector while 19% went for the development of road transport. Water/sanitation and education/ training received some 18%. The overall EC allocation of funds to Malawi under Lom amounted to ECU 74.3m (excluding regional and EC budgetary support).

LomI

The content of the LomI NIP (1980-85) was influenced by the deteriorating economic situation in the country after 1979. On the domestic front, Malawi suffered two years of drought in 1980 and 1981 while externally, there was a worsening in the terms of trade due to steep rises in imported fuel prices, capital imports and intermediate goods. There was also a decline in the export prices of tobacco, tea and sugar. The debt servicing problems of the country grew sharply as a result of increasing interest rates on the international money markets and higher transport costs for exports following the disruption of Malawi's traditional routes to the seaports. In the light of these constraints, the Community concentrated its development assistance on supporting food security and on expanding the national and regional road network. Thus, out of an NIP of ECU 80m, 39% was allocated to road transport and 32% to agriculture and fisheries. A further 11% was spent on social infrastructures and training programmes while 7% went to trade promotion and micro-projects. 6% was allocated to small enterprise development. The total LomI allocation to Malawi amounted to ECU 101.5m.

LomII

During the second half of the 1980s, Malawi experienced further external and internal shocks. The terms of trade continued to weaken, the rail lines to the ports of Mozambique were cut off completely and capital inflows fell leading to an accelerated loss of foreign reserves. The country also suffered two further droughts in 1986 and 1987. As a result, real GDP stagnated and inflationary pressures intensified. Having implemented a number of measures at the beginning of the 1980s, with the financial support of the IMF and the World Bank, aimed at restoring external and internal equilibrium, the country now issued a 'Statement of Development Policies 1987-1996' and formulated a comprehensive structural adjustment programme.

The LomII NIP took account of the balance of payments constraints and allocated ECU 12.5m to the Industrial and Trade Policy Adjustment Credit (ITPAC) developed with the help of the World Bank. It was becoming increasingly apparent that the food security of the majority of Malawians would depend on domestic agricultural development for the foreseeable future. Consequently, out of a total of ECU 114.5m in the NIP, 67% was allocated to agri-rural development. This involved an integrated socio-economic approach to the development of the rural areas of Malawi where 85% of the population lives.

This development programme also incorporated, for the first time, a 'child-spacing' programme. It was only in the second half of the 1990s that most ACP governments, including Malawi, accepted the need for measures to address the increasing socio-economic pressure caused by high population growth rates. Between 1964 and 1987, Malawi's population doubled. As a small country (94 200 km²) with one of the highest population densities in Africa (110 people per km²), Malawi was facing increasing pressure on its arable land. The average farm size of smallholders fell from 1.6 hectares in 1969 to 1.1 ha 20 years later. During this period the Community also continued to assist the development of the road infrastructure.

From 1986 onwards, the increasing conflict in Mozambique saw Malawi being confronted with a growing influx of refugees. In response, the EC provided ECU 16.8m for refugee relief programmes undertaken in the country by the UNHCR and various NGOs. The total support to Malawi under LomI amounted to ECU 167.7m.

LomV

As of 1988, Malawi's economy began to show signs of recovery. This was mainly due to the changed policy environment. Real GDP growth reached 7.8% in 1991 and the annual rate of inflation fell to 11.9%. The fiscal deficit (including grants) was also reduced to 1.8% of GDP by fiscal year 1991/1992 while the current account deficit amounted to 8.9% of GDP. How

ever, the basic development constraints remained. Accordingly, Malawi's NIP under the first financial protocol of LomV continued with the approach of concentrating on agri-rural development and road infrastructure. Of the ECU 121m available under the NIP, 65% and 25% were allocated to these sectors respectively. The remaining funds were earmarked for, among other things, balance of payments support.

Since the beginning of the 1990s, Malawi has experienced fundamental political changes and yet more internal and external shocks. With changes in the world political situation, western industrialised countries began to make more political demands on governments and put pressure on those that violated fundamental human rights. Since the 1960s, Malawi had been governed by an authoritarian and highly centralised political system. The government exercised very tight political, economic and social controls on both organisations and individuals, intimidating the entire population in the process. This approach also often had the effect of paralysing decision-making within government. In May 1992, the international donor community, including the EC, decided to freeze non-humanitarian aid to Malawi until such time as the government introduced and practised basic human rights in accordance with recognised international standards. This policy, combined with internal pressures, induced Dr Banda, the former President, to hold a referendum which took place in June 1993. In the poll, the majority of Malawians opted to abandon the one-party state in favour of a multiparty democracy. The first multiparty elections were held in May 1994 and the opposition -which had previously been proscribed -assumed power.

Because of these developments, the EC made no decision on a new development programme until after the referendum when the international donor community decided to end the aid freeze. In the interim, donor countries nevertheless supported various activities linked with the democratisation process. Thus, the EC provided ECU 1.2m towards aspects of the organisation of the referendum. In addition, Malawi received massive assistance during this period to help counter the effects of the 1991-92 drought, which was particularly severe. The EC was one of the main donors in this effort contributing, up to the end of 1994, some ECU 15m under LomV for the relief activities of the UNHCR and NGOs.

The effects of the drought and the economic insecurity resulting from the political changes contributed to a serious worsening in the balance of payments situation after 1991. The absence of market-determined exchange rates and the prospect of devaluation also led to increased currency speculation. In February 1994, the government and the Reserve Bank finally decided to liberalise the exchange rate system. After the aid freeze was lifted, and in view of the severe balance of payments situation, the EC decided to provide balance of payments support to the tune of ECU 30.6m. It also continued with its work on a comprehensive support programme for the agriculture sector. Work on a road project in the south of the country, which had been frozen, was accelerated during 1994. The appraisal of a rural health and population programme is currently under way while the Community (now the European Union) is also providing support to a number of programmes designed to enhance the democratisation process in the country.

Two further developments have also had an impact on recent EU support. Since the middle of the 1980s, the AIDS problem has grown rapidly. In Malawi, the present HIV infection rate is estimated at about 30% of the urban population and 12% of those who live in rural areas. In response to this crisis, the EU has been implementing an information, education and communication project since the beginning of 1990. This is aimed at target groups such as bar girls and lorry drivers as well as at the general public.

The second development has been the environmental degradation of the country. This has resulted both from the increased population density and the additional strain caused by the large-scale influx of refugees. Within its agricultural and afforestation programmes, the EU aims to address the issues of sustainable food security and the need for tree planting.

A final comment relates to the EU's regional activities from which Malawi has benefited. Several road projects have been supported from regional funds because they have improved the regional network. This have been of particular importance for Malawi's access to the outside world. In the context of EU/SADC regional cooperation, Malawi is responsible for fisheries, forestry and wildlife and assistance is provided to the Tsetse and Trypanosomiasis Control Programme and the College of Wildlife. Studies on regional wildlife and the Southern African Centre for Ivory Marketing have also been undertaken.

Finally, Malawi also plays an active role in the framework of the more recent Cross Border Initiative (CBI) which aims to facilitate intra-regional trade and investment. In December 1994, the government sent a letter to the Commission setting out CBI policy and specifying comprehensive reforms for implementing the objectives of the initiative. In response to this, the EU is providing additional balance of payments support to the tune of ECU 12m.

Outlook

To summarise, EC-Malawi cooperation under the Lomonventions has been determined by the evolving requirements of the country. The EU is playing a leading role in the policy dialogue with the government and it provides a substantial proportion of total development assistance to the country (85% of whose development budget is currently financed by the donor community). But in spite of major international assistance for the development of Malawi, critical analysis reveals that the standard of living of the majority of the population has not improved over the last 30 years, and the social indicators are still among the worst in the world. As indicated above, both external and domestic constraints have hampered a more rapid development.

Without donor support, however, it can be assumed that the majority of the population would have been even worse off. Thus, there is no alternative to development aid, although the man-made constraints need to be addressed better. In other words, better coordination of development efforts is needed involving the social partners within Malawi and the international donor community.

Under the 'Poverty Alleviation Programme', the achievement of household and national food security is the main theme. This implies the development of natural resources, particularly in the agricultural sector, as well as consideration for the environmental impact of such efforts. Improving the health of the population, controlling population growth and providing better education and vocational training are further important components in the drive to achieve food security. Under the second phase of LomV, the EU will certainly be willing to consider supporting Malawi in addressing these and other development-related issues.

The new government must, however, also display a full commitment to these concerns and demonstrate that it is in a position to manage scarce financial resources in such a way as to achieve determined development objectives. In this context, the structural reforms that are needed in the public sector must be implemented in order to overcome the current severe fiscal deficit. Finally, it is hoped that the government will take the lead in prioritising development objectives, strategies and activities. Where required, external expertise may be provided, but the 'ownership' of the development process must rest with the people of Malawi and their representatives.