HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements...Malawi

# 					2017 Investment Climate Statements: Malawi			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Malawian government is eager to attract foreign direct investment. The Malawi Investment and Trade Center’s One Stop Center offers assistance on how to navigate relevant regulations and procedures. In general, there are adequate legal instruments to protect investors. Foreign investors are generally accorded national treatment.

Malawi has been largely free of political violence since gaining independence in 1964. Although divisions do exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could be expected to lead to violent confrontation.

Agriculture accounts for one third of GDP and 80 percent of Malawi’s exports. Opportunities exist for investment in the agricultural sector, particularly for processing and value addition. As the United States government concludes a $350 million effort to upgrade electrical transmission lines and assist in policy reform to attract additional power sector investment, the power sector provides increased opportunities for investors.

Although the Government of Malawi has made some efforts to combat corruption, it remains a major obstacle to investment in Malawi. Scarcity of skilled and semi-skilled labor is another serious impediment to doing business in Malawi and is most acute in occupational categories that include accountants and financial management personnel, economists, engineers, lawyers, IT, and medical/health personnel.

There is an established mediation process to promote agreements between parties in disputes before court proceedings start. Both foreign and domestic investors have access to Malawi’s legal system, which functions fairly well and is generally unbiased but slow.

All investors have the right to establish, acquire, and dispose of interests in business enterprises. Foreigners require a business residence permit (BRP) to carry out any business activity in Malawi. All new land acquisitions are done under leases. Lease terms for foreigners may be limited to 50 years, compared to 99 years for Malawians.

Government continues to undertake various reforms to ensure that no tax, labor, environment, health and safety, or other laws distort or impede investment. However, procedural delays continue to impede the business and investment approval process.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

The Government of Malawi encourages both domestic and foreign investment and foreign investors are generally granted national treatment. Investors, both domestic and foreign, may invest in any sector of the economy, with no restrictions on ownership. There are no restrictions on the size of investment, the source of funds, or whether products are destined for export or for the domestic market. The Government of Malawi is also actively trying to improve its business climate and actively participates in the Public Private Dialogue, a forum chaired by the Minister of Industry, Trade, and Tourism, where businesses can voice their concerns regarding public service delivery and the investment climate.

The Malawian constitution protects investment irrespective of nationality. There is no government screening of foreign investment in Malawi. The government’s overall economic and industrial policy does not have discriminatory effects on foreign investors. Since industrial licensing in Malawi applies to both domestic and foreign investment and is only restricted to a short list of products, it does not limit competition, protect domestic interests, or discriminate against foreign investors at any stage of investment.

The Malawi Stock Exchange limits an individual foreign investor to 10 percent of the shares of any one company during its initial public offering (IPO) and the aggregate of all foreign investors participating in the IPO is limited to 49 percent of shares. These restrictions only apply to the initial offering and do not apply to any future trading of shares.

The Malawi Investment and Trade Centre (MITC) is the Government of Malawi’s trade and investment promotion agency. Established to promote Malawi as a destination for trade and investment, it maintains a compendium of foreign investment opportunities and two websites (www.mitc.mw  and trade.mitc.mw ) that provide information on potential sectors for investment and relevant regulations. MITC also operates a One-Stop Service Centre in Lilongwe to help foreign and domestic businesses navigate relevant regulations and procedures.

MITC hosts representatives of the Registrar General (for business registration), the Malawi Revenue Authority (for tax registration), the Department of Immigration (to help process visa and residency permit for foreign investors, staff, and their families), and the Ministry of Lands, Housing, and Urban Development (to help identify and secure land for investment projects). MITC can provide assistance in identifying local joint venture partners and business services providers as well as offer advice on market opportunity, business environment, labor practices, and available incentives for investors and exporters.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Foreign and domestic private entities are generally free to establish and own business enterprises and engage in all forms of remunerative activity regardless of size of the investment, source of funds, or destination of the final product.

There are some limitations on foreign ownership of land. Under a recently revised Land Act yet to enter into effect, neither Malawians nor foreigners will be able to acquire freehold land; foreigners will be able to secure lease-hold land for terms up to 50 years, and potentially longer.

During the privatization of government assets, Malawian nationals are offered preferential treatment, including discounted share prices and subsidized credit. Subsidized credit carries a precondition that the shares or assets be retained for at least two years.

Small-scale prospecting and mining operations are reserved for Malawians and foreigners who have resided in Malawi for a minimum of four years. While not a legal requirement, for at least one large mining project, the Government of Malawi asked for and obtained a 15 percent equity share during licensing negotiations.

There is no government policy to screen foreign direct investment. However, foreign direct investment (FDI) needs to be registered with the Malawi Investment and Trade Center (MITC, www.mitc.mw) and investment capital over $50,000 must be registered with the Reserve Bank of Malawi (RBM, www.rbm.mw) through any commercial bank in Malawi. Registration of borrowed invested funds allows investors to externalize profits to pay back loans contracted abroad.

**Other Investment Policy Reviews**

The World Trade Organization (WTO) conducts periodic Trade Policy Reviews of Malawi. The last one was conducted in April 2016. These trade policy reviews have informed development cooperation and assistance to Malawi. The full report and recommendations can be accessed at https://www.wto.org/english/tratop_e/tpr_e/s335_e.pdf 

**Business Facilitation**

To facilitate the process of starting a business, the Malawi Investment and Trade Center (MITC) operates a One Stop Center. It offers assistance to foreign and domestic investors of all sizes on how to navigate relevant regulations and procedures. It hosts representatives of the Registrar General, the Malawi Revenue Authority, the Department of Immigration, and the Ministry of Lands, Housing, and Urban Development. MITC’s main website (www.mitc.mw) and trade portal (trade.mitc.mw) provide information about sectors and projects targeted for investment.

In addition to MITC’s One Stop Center, business registration can theoretically be done online at http://www.registrargeneral.gov.mw/ . However, there are known problems with accessing the website and delays in acquiring a user name. To operate in Malawi, in addition to registering the company with the Registrar General, companies also need to register with the Malawi Revenue Authority and often with the Ministry or regulatory body overseeing their sector of activity (for example, construction companies, both foreign and domestic, need to register with the National Construction Industry Council of Malawi).

The government affiliated Small and Medium Enterprise Development Institute (SMEDI) offers training, assistance in access to finance, market linkages, and mentorship opportunities to domestic SMEs.

**Outward Investment**

MITC is mandated to promote outward as well as inward investment. However, MITC rarely facilitates outward bound investment as it is more focused on inward investment.

There are some limitations on outward investment, especially applied to pension funds and umbrella funds. The Pension Act of 2010 and accompanying regulations do not allow for the investment of pension funds or umbrella funds abroad, thus imposing constraints on asset diversification.

							2. Bilateral Investment Agreements and Taxation Treaties					

Malawi’s policy is to negotiate bilateral investment treaties with countries whose nationals opt to invest in Malawi. Malawi has signed investment agreements with Italy, Libya, the Netherlands, and Zimbabwe. Malawi does not have a bilateral investment treaty with the United States. Malawi maintains bilateral trade agreements with Mozambique, South Africa, China, and Zimbabwe, and a customs agreement with Botswana. Malawi is a member of the Common Market for Eastern and Southern Africa (COMESA) Customs Union and the Southern African Development Community (SADC) Free Trade Area, which is governed by the SADC Protocol on Trade. The Republic of Malawi has signed multilateral trade agreements including the Cotonou Agreement between European Union and the African, Caribbean, and Pacific Group of States, and a Tripartite Free Trade Agreement between COMESA, SADC, and the East African Community, and is a member of the WTO. Malawi is a beneficiary of the Africa Growth and Opportunity Act (AGOA).

Malawi and the United States do not have a bilateral tax treaty. Investments, and income derived from them, are subject to applicable taxes in both jurisdictions. However, Malawi has signed tax treaties with the UK (1955), Switzerland (1961), France (1963), South Africa (1971), Norway (2009), the Seychelles (2012-currently not in force), the Netherlands (2015-curently not in force), and Botswana (2016)

							3. Legal Regime					

**Transparency of the Regulatory System**

The government continues to undertake various reforms to ensure that no tax, labor, environment, health, safety, or other laws distort or impede foreign or domestic investment. The legal, regulatory, and accounting systems are somewhat transparent and consistent with international norms. For example, to increase transparency in the mining sector, Malawi applied for and was granted EITI candidate status. However, procedural delays continue to impede the business and investment environment.

While market prices for goods are generally not controlled, the government sets minimum prices for some agricultural commodities including tobacco, cotton, and tea. State-provided utilities are regulated and government has instituted automatic pricing mechanisms for fuel and electricity based on, among other factors, exchange rate fluctuations. The Ministry of Industry, Trade and Tourism (MoITT) retains the legal authority to ban the import or export of any good at any time. While this power is seldom used, it can constitute a risk to investors intending to import or export as part of their business. MoITT currently requires export permits for ten categories of goods, including the staple food crops of maize and rice.

Certain professional associations have sectorial rule-making power that amounts to regulatory power. These professional bodies include the National Construction Industry Council, Malawi Law Society, Malawi Accountants Board, and the Employers Consultative Association of Malawi. Some of these associations have set regulations that require the use of local labor, local contractors, or other means to achieve localization or skills transfer to Malawians. Such rules are printed in the Government Gazette, available from the official government printing office. As they are set by associations with closed membership, the rule-making process is not always transparent to foreign firms that have not yet entered the Malawi market, but are considering doing so.

The government of Malawi uses a mix of fiscal, financial, and regulatory instruments to administer its investment policy, and thus management and responsibility is spread across multiple ministries and agencies. The Malawi Investment and Trade Centre (MITC) is normally the first point of inquiry for new investors. MITC falls under the Ministry of Industry, Trade and Tourism as an agency to implement investment promotion initiatives. Taxation policy is the jurisdiction of the Treasury Department in the Ministry of Finance. The Malawi Revenue Authority (MRA) is the main implementing agency for tax policy; it administers the Taxation Act and other relevant legislation. Some regulatory incentives are within the jurisdiction of their respective ministries. The Reserve Bank of Malawi (RBM) administers the market-based exchange rate of the Malawi kwacha, as well as liberal exchange controls to allow free flow of capital and earnings — repatriation of dividends, profits, and royalties. The Ministry of Internal Affairs’ immigration department administers the Employment of Expatriates Policy, Temporary Employment Permits (TEPs), and Business Residence Permits (BRPs). The Ministry of Lands, Housing and Urban Development is responsible for land policy administration.

In 2001, the Institute of Chartered Accountants in Malawi (previously known as Society of Accountants in Malawi) adopted the International Financial Reporting Standards (IFRS), which are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. The IFRS are the applicable framework for all companies incorporated under the Companies Act in Malawi. Subsequently, the Institute of Chartered Accountants in Malawi has also adopted the IFRS for Small and Medium Entities Standard as the applicable framework for all non-publicly accountable entities.

Almost all proposed laws, regulations, and policies are subject to public consultation before they are submitted to Cabinet and Parliament. However, sometimes the public notice of such consultations is not issued in a timely manner, with the effect that only insiders are aware of and able to plan to attend the meetings. Sometimes there is an opportunity to submit written comment rather than, or in addition to, attending a meeting, but this is not always the case. Parliamentary procedure calls for draft bills to be debated in relevant committees before being presented on the floor for a vote. Parliamentary rules do, however, permit fast-tracking bills to avoid this step.

Recent laws can generally be purchased from the government printing office or accessed at the National library and in the High Court libraries in major cities. An increasing number of laws are also available online at www.malawilii.org . Technical regulations on the other hand are not centralized and are managed by relevant government Ministries, Departments, and Agencies (MDA). These are published in the Malawi Government Gazette and form part of schedules to relevant acts. Although some of the MDAs do not have operational websites, those that do often have these laws and regulations available online. Some older regulations can be difficult to locate.

The Ministry of Justice and Constitutional Affairs is mandated to provide oversight or enforcement mechanisms to ensure MDAs follow administrative processes for developing and implementing regulations. If they feel procedures were not followed, private individuals and entities can bring a case against the government in court or seek redress through the Office of The Ombudsman. There are no specific regulatory guidelines for periodically reviewing regulations or conducting impact assessments. Furthermore, there are no specific criteria for determining which proposed regulations are subject to an impact assessment nor is there a specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies. All technical regulations are enforced by relevant government Ministries, Departments, and Agencies.

There have been positive steps toward increasing regulatory transparency and improving the foreign investment environment, including the passing of the Credit Reference (Amendment) Act of 2016, the Electronic Transactions Act of 2016, the Financial Crimes Act of 2017, the Payment Systems Act of 2016, and the Insolvency Act 2016, and the coming into force of the Companies Act of 2013.

Over the past 24 months, government has implemented a number of reforms to improve the ease of doing business, such as consolidating procedures at the borders to facilitate smooth flow of goods, reducing the number of days needed to register a business, as well as improving the handling of business related cases. These reforms, among others, have helped Malawi improve its Doing Business ranking from 141 in 2016 to 133 in 2017. Others reforms are meant to reduce the delays in the approval of construction permits and property registration thereby helping to attract more local and foreign investors.

**International Regulatory Considerations**

Malawi is a member of the Common Market for Eastern and Southern Africa (COMESA) Customs Union and the Southern African Development Community (SADC) Free Trade Area, which is governed by the SADC Protocol on Trade. All regulations are developed in line with the regulatory policy provisions that are set out by COMESA and SADC, but national regulations rule if there is a conflict.

As a member of both SADC and COMESA, Malawi is bound by their respective norms and standards. Details can be found on the organizations respective websites:

- SADC:  http://www.sadc.int/themes/economic-development/industry/standards-quality-infrastructure/ 
- COMESA:  http://www.comesacompetition.org/ 

Since 1995, there is no record of Malawi providing notification on draft technical regulations to the WTO Committee on Technical Barriers to Trade. The last time Malawi submitted a statement on implementation and administration of the WTO Agreement on Technical

Barriers to Trade was in 2007.

**Legal System and Judicial Independence**

Malawi’s legal system is based on English Common Law. The judiciary consists of local courts and a local appeals court in every district. The higher tiers consist of the Supreme Court of Appeal, the High Court, and the magistrates’ courts. The High Court is presided over by a chief justice and four judges, appointed by the president. It has judicial authority over all civil and criminal cases, and sits in Blantyre, Lilongwe, Mzuzu, and Zomba. Magistrates’ courts are located in cities and towns in 24 districts throughout the country. Appeals from the magistrates’ courts are heard by the High Court and those arising from the High Court by the Supreme Court of Appeal in Blantyre.

Malawi does not have written commercial law or contractual law but has legislation that governs commercial transactions which include the Sale of Goods Act, Companies Act, Employment Act, Hire Purchase Act, Insolvency Act, and Control of Goods Act. By local standards, the Commercial Courts work reasonably efficiently, with dedicated judges and their own registries. There is an established mediation process to promote agreements between parties in disputes before court proceedings start. Enforcement of judgments can be slow.

Both foreign and domestic investors have access to Malawi’s legal system, which functions fairly well and is generally unbiased. Heavy caseloads, staffing limitations, and inadequate funding, however, mean that legal remedies can take a long time to achieve. There has been little overt government interference in the court system. However, the judicial system has been criticized for the ease with which court injunctions are granted in Malawi, further contributing to the backlog and delays.

Regulations and enforcement actions are appealable and are adjudicated in the national court system. In the financial sector, regulations and enforcement actions are appealable through the Financial Services Appeals Committee. If the decision by the Appeals Committee is not accepted, local and foreign investors are free to seek judicial review through the High Court of Malawi.

**Laws and Regulations on Foreign Direct Investment**

Malawi Recently passed a number of laws aimed at improving the investment environment and these include:

- The Companies Act 2013 which only came into force in 2016. The Act strengthens the Office of the Registrar of Companies and in many respects aims to reduce the cost of doing business in Malawi.
- The Payment Systems Act 2016 provides clarity and transparency to oversight and regulatory arrangements for payment instruments in Malawi, including automated high value transfer systems.
- The Electronic Transactions Act 2016 seeks to enable people to transact various services electronically with full protection of the law and also ensure that people are protected from computer related harassments like viruses, hacks, and cybercrimes.
- The Insolvency Act 2016 aims to provide a modern, harmonized, and fair framework to address more effectively instances of cross-border insolvency. These include foreign assistance for an insolvency proceeding taking place in the enacting State; foreign representatives’ access to courts of the enacting State; recognition of foreign proceedings; and cross-border cooperation.
- The Credit Bureau (Amendment) Act 2016 aims to free institutions, such as banks, to provide client information to Credit Reference Bureaus (CRB) without running the risk of breaching bank client confidentiality.
- The Financial Crimes Act 2017 establishes the Financial Intelligence Authority (FIA), criminalizes laundering and proliferation of weapons of mass destruction, imposes heavy penalties on money laundering and terrorist financing crimes, and provides for administrative sanctions for non-compliant financial institutions.
- Taxation Amendment Act 2016 allows for taxpayers to enter into an Advance Pricing Agreement (APA) with the Malawi Revenue Authority with respect to income derived from mining projects, provided that the duration of the APAs does not exceed a period of five years.
- Land Laws comprising the Land Act 2016, Physical Planning Act 2016, Land Survey Act 2016, and Customary Land Act 2016.
- Electricity (Amendment) Act 2016 allows for the bringing in of independent power producers and unbundling the Electricity Supply Commission of Malawi into two separate entities — one for distribution and one for generation and transmission.
- Access to Information Act 2017 provides the right to access information in accordance with the principles that government information should be available to the public.
- The Copyright Act 2016 provides enhanced legislation related to copyright in Malawi to ensure that legislation is adapted to the modern digital environment and complies with international conventions.

**Competition and Anti-Trust Laws**

The Malawi Competition and Fair Trading Act of 1998 (CFTA) only became fully operational when the Competition and Fair Trading Commission (CFTC, www.cftc.mw ) was established in 2005. Since 2013, the institution has overseen 26 applications for merger and acquisition and dismantled five cartels. The CFTC’s role is to encourage competition in the economy, to regulate and monitor monopolies and concentrations of economic power, to protect consumer welfare, and to ensure the best possible fair market conditions. So far no mergers or acquisitions have been disapproved. CFTC decisions may be appealed, first to the Board and subsequently to the Commercial (High) Court.

**Expropriation and Compensation**

Malawi’s constitution prohibits deprivation of an individual’s property without due compensation. There are effective laws that protect both local and foreign investment. Measures that carry expropriation effects are occasionally imposed, including export bans (and implicit bans due to the government’s authority to required export licenses for any good at any time) for key commodities. These restrictions applied equally to foreign and domestic investors.

The government can employ land acquisition procedures set forth in the Land Acquisition Act of 2016. According to this Act, the government must justify its acquisition as being in the public interest and must pay fair market value for the land. If the private landowner objects to the level of compensation, it may obtain an independent assessment of the land value. According to the Act, however, such cases may not be challenged in court; the Ministry of Lands, Housing, and Urban Development remains the final judge.

**Dispute Settlement**

Malawi has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Malawi is a member of the International Center for Settlement of Investment Disputes (ICSID), accepting binding international arbitration of investment disputes between foreign investors and the state. Malawi’s current president is a former arbitrator for ICSID. It is not a signatory to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

The Investment Disputes (Enforcement of Awards) Act, 1966 makes provision for the enforcement in Malawi of Awards of the Tribunal of the International Centre for Settlement of Investment Disputes.

Malawi does not have Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

The court system in Malawi accepts and enforces foreign court judgments that are registered in accordance with established legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this registration obligation. The Embassy is not aware of any extrajudicial actions that have been taken against foreign investors in the recent past. Since 1996, there have been no major investment disputes involving U.S. companies.

Malawi does not have an arbitration body. There is no statutory requirement for parties to arbitration to submit to alternative dispute resolution. Parties will only be required to go through mediation before proceeding to arbitration if an agreement entered into between them requires them to do so.

With respect to litigation, most cases commenced in the High Court of Malawi or any subordinate court must, where the defendant indicates an intention to defend, first go to mediation. The Assistant Registrar of the High Court maintains a list of mediators and a list of experts. The mandatory mediation is conducted by a person chosen by the agreement of the parties from the list of mediators maintained by the Assistant Registrar or, if the parties consent, a person who is not named on the list. If the matter is not settled during mediation, the action will proceed in the court in which it was commenced.

The court system in Malawi accepts and enforces foreign court judgments that are registered locally in accordance with established legal procedure. There are reciprocal agreements among Commonwealth countries to enforce judgments without this registration obligation. There is no such agreement between Malawi and the United States, but judgments involving the two countries can still be enforced if the judgment is registered appropriately in Malawi.

The Embassy does not have available statistics on investment disputes involving SOEs.

**Bankruptcy Regulations**

All bankruptcies are governed by the courts under the provision of the consolidated Insolvency Act of 2016. The Act encourages alternatives to bankruptcy such as receivership and reorganization and gives secured creditors – rank-ordered based upon investment registration dates – priority over other creditors. Monetary judgments are usually made in the investor’s currency. Cross border provisions of the Insolvency Act are modeled after United Nations Commission on International Trade Law model laws.

							4. Industrial Policies					

**Investment Incentives**

The Malawi government offers a wide range of tax and non-tax incentives which apply equally to domestic and foreign investors. These incentives apply to several sectors including manufacturing, agriculture, mining, and others relating to businesses in general. Customs and excise tax incentives are provided on raw materials, machinery, and equipment in a number of sectors. Specific incentives tend to vary from year to year. A detailed list of investment incentives can be found at the Malawi Investment and Trade Center (MITC) website: www.mitc.mw .

Generally speaking, the incentives offered to investors are applied consistently, but many companies complain about long delays in accessing the accrued benefits, especially those that require investors to spend first and claim later. Additionally, firms must negotiate their eligibility for these incentives with the responsible government entities. Some companies complain that this amounts to an undue burden, particularly because when the law changes, old incentive agreements are not automatically grandfathered but must be renegotiated on a case-by-case basis. In all of these areas, foreign investors are generally accorded the same treatment as nationals.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Legislation for the establishment of export processing zones (EPZs) came into force in 1995. Companies engaged exclusively in manufacture for export may apply for EPZ status. As of March 2016, 13 companies were operating under the EPZ scheme. Almost all of these are foreign owned companies, though the law does not discriminate on ownership. A Manufacturing under Bond (MUB) scheme offers slightly less attractive incentives to companies that export some, but not all, of their products. Most investors prefer to operate under the EPZ arrangement.

**Performance and Data Localization Requirements**

Embassy Lilongwe is not aware of any forced localization policies. There is, however, a requirement that at least two Malawian residents be appointed directors of companies registered in Malawi.

The “Policy Statement and New Guidelines for The Issuance and Renewal of [Expatriate] Employment Permits” of 1998 states that investors may employ expatriate personnel in areas where there is a shortage of “suitable and qualified” Malawians. The policy provides for two types of temporary employment permits (TEPs):

- Those for “key posts” (defined as positions of “strategic importance” in business operations) which are granted for the lifespan of the organization.
- Those for “time posts” (defined as positions with contracts of three-year duration or less) which are granted for three-year periods and renewable once.

Malawi employment and immigration laws and regulations require that any local or foreign investor prioritize the hiring of nationals except in cases where the skills required to undertake certain task are not locally available. These laws and regulations are to a large extent enforced by the Department of Immigration when issuing Temporary Employment Permits to foreign nationals.

The process to obtain employment permits can sometimes discourage investors. Expatriate employees (of both domestic and foreign businesses) who reside and work in Malawi must obtain temporary employment permits (TEPs). The government desires to make TEPs readily available to expatriates, and mandates that processing times for TEP applications shall not exceed 40 working days. In practice TEPs take significantly longer and face significant bureaucratic delays (anecdotal reports of several months to a year are not uncommon) as files are not digitized and TEPs are approved by a high-level committee that does not meet regularly. In recent years, several TEP applications have faced extended delays when individuals involved have had disputes with politically-connected individuals. The guidelines have been applied inconsistently and the criteria against which cases are considered is not always clear, leading to delays and considerable uncertainty for both employers and employees.

There are a few legal restrictions on foreign investment based on environmental, health, biosafety, and national security concerns. Affected sectors are firearms and ammunition; chemical and biological weapons; explosives; and manufacturing involving hazardous waste treatment/disposal or radioactive material. Since industrial licensing in Malawi applies to both domestic and foreign investment, and is only restricted to a short list of products, it does not limit competition, protect domestic interests, or discriminate against foreign investors at any stage of investment. Additionally, retail operations in rural areas are limited to only Malawian citizens, although enforcement is weak.

Malawi does not set performance requirements for establishing, maintaining, or expanding an investment, nor does it place requirements on source of financing or geographic location. While not discriminatory to foreign investors, investments in Malawi require multiple bureaucratic processes, which may include obtaining a business license, a tax registration number, and a land use permit. These procedures can be time consuming, particularly when it comes to land permits, and may constitute an impediment to investment. Investors may also face bureaucratic hurdles in obtaining temporary employment permits (TEPs) and business residency permits (BRPs).

Embassy Lilongwe is not aware of any requirements for foreign IT providers to turn over source code or provide access to encryption. There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country’s territory. Embassy Lilongwe is not aware of any mechanisms that are in place to enforce any rules on local data storage within the country.

							5. Protection of Property Rights					

**Real Property**

Malawi has laws that govern the acquisition, disposition, recording, and protection of all property rights (land, buildings, etc.) as well as intellectual property rights (copyrights, patents, trademarks, etc.). Currently record keeping for registering land ownership is centralized and inefficient. Efforts are underway to computerize the recordkeeping and to decentralize it to the district councils.

Malawi has a limited housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit. The lowest recorded interest rate on a mortgage in Malawi as of September 2016 is 34 percent and requires at least a 20 percent down payment and is repaid over 15-20 years. The average mortgage size in Malawi is $17,632. Mortgage lenders target salaried individuals and those operating registered businesses with business accounts. The house to be bought or constructed remains a property of the lending bank until the whole mortgage is settled.

In 2016, Parliament passed a revised Land Act which converted customary land tenure to leasehold title so that those currently using that land can have legal rights to the land. This has enabled land holders to use such land as collateral for acquiring financing to develop the land and/or to finance other business ventures. The new land law prohibits freehold title going forward and all newly acquired land will be on a leasehold basis. Lease terms can be for up to 99 years, but the law restricts foreign leaseholders to leases of up to 50 years, although exceptions exist.

In November 2015, Malawi’s land minister issued a warning that unused land owned by developers would be repossessed by the government unless the developers started to use it. The Land Act 2016 gives provision for private land under freehold hold title to be repossessed by government within two years of registration. However, no land belonging to developers has been repossessed by government in the last year.

**Intellectual Property Rights**

Malawi recognizes the importance of intellectual property protection and enforcement but lacks the capacity to do so. The Registrar General administers the Patent and Trademarks Act of 1948, which protects industrial intellectual property rights in Malawi. A public registry of patents and patent licenses is kept. Patents must be registered. Trademarks are registered publicly following advertisement and a period of no objection.

Enforcement of intellectual property rights is inadequate. However, general awareness of the importance of protecting intellectual property in all forms (copyrights, trademarks, patents, trade secrets, and others) has improved. The Copyright Society of Malawi (COSOMA) administers the Copyright Act 2016 which protects copyrights and “neighboring” rights in Malawi. Led by COSOMA, intellectual property rights enforcement agencies commemorate World IP Day in April. Although the commemoration has focused primarily on copyrights, it has nonetheless helped to promote awareness of the importance of protection of intellectual property rights.

The Ministry of Industry and Trade worked with COSOMA, the Registrar General, and the Africa Regional Intellectual Property Organization (ARIPO) to pass the Copyright Act of 2016 (replacing the Copyright Act of 1989) to align relevant domestic legislation with the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement.

The Copyright Act 2016 provides enhanced protection for copyrights, adapts copyright regulations to the modern digital environment, brings Malawi into compliance with international conventions (including the Agreement on Trade Related Aspects of Intellectual Property (TRIPS Agreement), WIPO Copyright Treaty (WCT), WIPO Performances and Phonograms Treaty (WPPT), the Beijing Treaty for the Protection of Audiovisual Performances, and the Marrakesh Treaty for provision of copyright works by the Visually Impaired Persons and Persons with Print Disabilities), and increases penalties for infringement to fines ranging from MK 2 million to MK 10 million ($2,800-$14,000) and up to four years imprisonment (previously MK 220 ($0.28)-MK 15,000 ($21) and up to one year in prison). The Act also provides for administrative penalties to deal with minor offences and establishes a Copyright Fund to enhance enforcement and promotion of artistic works.

The government has signed and adheres to bilateral and multilateral investment guarantee treaties and key agreements on intellectual property rights. Malawi is a member of the convention establishing the Multilateral Investment Guarantee Agency (MIGA), the World Intellectual Property Organization (WIPO), the Berne Convention, and the Universal Copyright Convention.

While enforcement officials routinely seize counterfeit goods and goods suspected to be counterfeit, Malawi does not have a systematic approach to tracking and reporting on such seizures and no reliable estimates of the number of seizures, type or value of goods seized, or related information are available.

Malawi is not listed in USTR’s Special 301 Report or in the 2016 Notorious Market Report which highlights prominent online and physical marketplaces that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

The Government of Malawi recognizes the importance of foreign portfolio investment and has made efforts to provide for a platform for such investment through the establishment of a Malawi Stock Exchange (MSE, www.mse.co.mw ).

The Malawi Stock Exchange (MSE) hosts about a dozen listed companies with a total market capitalization of $796.25 million as of December 30, 2016. Most of these companies are local and a few are regional. The demand and supply of shares for existing listed companies is limited. However, demand for newly listed companies has always exceeded the shares on offer. The MSE is regulated by the Reserve Bank of Malawi and is governed by the Companies Act, Capital Market Development Act (1990), Capital Market Development Regulations (1992) as amended in 2013, and the Securities Act (2010).

Foreign investors can buy and sell shares at the stock market without any restrictions. Trading in shares can either be direct or through any one of the four established brokers. There are no specific measures taken by private firms or government to restrict foreign investment or participation. Foreign investors tend to be the dominant shareholders in large MSE-listed companies requiring significant technical and financial resources. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities.

Malawi respects obligations under IMF article VIII and therefore refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval.

Liquidity for stock market participation is not a major problem as the private sector in Malawi has a variety of credit instruments. Credit is generally allocated on market terms. The main problem is the cost of credit given high rates of inflation in recent years. Foreign investors may utilize domestic credit, but proceeds from investments made using local resources are not remittable.

**Money and Banking System**

Malawi has a generally sound banking sector, overseen and regulated by the Reserve Bank of Malawi — the central bank. In 2017, following FDH Holdings Ltd’s acquisition of Malawi Savings Bank Ltd and National Bank of Malawi Ltd’s acquisition of Indebank Ltd, there were ten full-service commercial banks with over 70 branches across the country. They remain well capitalized and profitable. Prudential regulations have limited net foreign exchange exposure and non-performing loans remain low, though spreads continue to be high. The sector, however, is highly concentrated. Two banks, National Bank and Standard Bank, dominate the market with $691 million in total assets, 43 percent of the banking sector’s total assets.

Only 19 percent of the adult population uses banking services and the government has provided incentives to encourage mobile banking services. While the passage of legislation to create a private credit reference bureau should help improve information on credit history, access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit (lending rates in December 2016 ranged from 33 percent – 42 percent). There is a huge potential for using mobile banking technology to increase financial access in Malawi.

Banking assets totaled $138 million in March 2016, 41 percent of which is loans and leases, 26 percent securities and investments, all other assets make up 33 percent. Of deposits, 35 percent are demand deposits, 28 percent foreign currency deposits, 37 percent savings and time deposits, with a liquidity ratio at 60 percent. In March 2016 15 percent of gross loans and leases were non-performing, up from 12 percent in September 2015.

The Reserve Bank of Malawi is the country’s central bank and it oversees the banking sector. It was established in July 1965, a year after the country’s independence from Britain. The Bank plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi. It is also a supervisory authority over commercial banks and other financial institutions including insurance companies.

There are no restrictions on a foreign bank establishing operations in Malawi. The Banking Act provides for the regulations of the business of banking in Malawi conducted by commercial banks and other financial institutions and also provides a mandate to the Reserve Bank for the supervision of banking business.

National Bank of Malawi (NBM) maintains banking relationships with over thirty correspondent banks, including Citibank New York, Standard Chartered Bank of London, First National Bank of South Africa, Standard Bank of South Africa, ABSA Bank Limited of South Africa, Citibank of South Africa, Standard Chartered Bank Ltd, Bank of Montreal, Standard Chartered Bank Ltd, Danske Bank, Skandinaviska Enskilda Banken AB, Standard Chartered Bank Botswana Ltd, Standard Chartered Bank Kenya Ltd, Standard Chartered, Bank Zambia Ltd, Nedbank Swaziland Limited, Deutsche Bank AG, Deutsche Bank Trust, and Bank of China. Banking services include demand-deposit accounts, telegraphic transfers, and travelers’ checks.

Standard Bank (SB) maintains banking relationships with Citibank, Chemical Bank, Bank of New York, Bank of America, and Equator Bank. Banking services include demand deposit accounts, telegraphic transfers, and Citibank travelers’ checks.

First Merchant Bank (FMB) maintains banking relationships with Citibank, ABSA Bank of South Africa, Natxis Bank of France, and DCB Bank of India. Banking services include demand deposit accounts and telegraphic transfers.

Malawian banks require that a foreigner possess a temporary employment permit (TEP) or business residency permit (BRP) before opening a bank account. While not discriminatory to foreign investors, acquiring the BRP or TEP in Malawi requires multiple bureaucratic processes which can be time consuming. The government desires to make TEPs readily available to expatriates, and mandates that processing times for TEP and BRP applications should not exceed 40 and 30 working days respectively. In practice both TEPs and BRPs take significantly longer and face significant bureaucratic delays as files are not digitized and TEPs are approved by a high-level committee that does not meet regularly. In recent years, several TEP and BRP applications have faced extended delays when individuals involved have had disputes with politically-connected individuals. The guidelines have been applied inconsistently and the criteria against which cases are considered is not always clear, leading to delays and considerable uncertainty for both employers and employees.

**Foreign Exchange and Remittances**

*Foreign Exchange*

Funds associated with any form of investment can be freely converted into any major world currency. Government policy seeks to ensure the availability of foreign exchange for business transactions and remittances in order to attract investors and spur economic growth. Commercial banks may operate as forex dealers. Investors have access to forex with no legal limitation, both to pay for imports and to transfer financial payments abroad. Specifically, there are no licensing requirements to import forex and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans is permitted, once the loan and/or investment is registered with the Reserve Bank of Malawi. Malawian investors seeking foreign financing must seek permission from the Reserve Bank of Malawi before acquiring an international loan. The Malawi Kwacha (MWK) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies.

Since May 7, 2012, the value of the local currency, the MWK, has floated freely against major world currencies. In 2016, the Malawi Kwacha depreciated by 8.32 percent against the U.S. Dollar. Exchange rate fluctuations coincide with agricultural cycles, particularly the tobacco selling season April through August. Foreign exchange is available throughout the year and Malawi’s official foreign exchange reserves currently are sufficient to cover almost three months of imports.

*Remittance Policies*

There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) as long as the capital and loans were obtained from foreign sources and registered with the Reserve Bank of Malawi (RBM, www.rbm.mw ). The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval. The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are fairly automatic as long as the applicant’s accounts have been audited and sufficient foreign exchange is available. While there are no legal restrictions, in recent years there have been some instances of banks lacking sufficient foreign exchange to conduct all remittances immediately.

**Sovereign Wealth Funds**

Malawi does not have a Sovereign Wealth Fund or similar entity.

							7. State-Owned Enterprises					

Malawi has over 60 State-Owned Enterprises (SOEs) scattered across many industries/sectors including agriculture and agribusiness, education, construction, energy, finance, health, information and communication, media, public utilities, aviation, and services. These enterprises are divided into categories by the level of support that they require from government in order to operate — fully funded, partially funded, and fully commercial. Government is sometimes required to bail out commercially-run SOEs when they have incurred losses.

Some SOEs perform public service functions, some are commercial in nature, and some are a mixture of both. All are subject to government regulations that apply to other government departments including on employment and procurement procedures, though some variations apply. All SOEs are required by law to produce annual reports, but do not always do so on time. Commercial SOEs are required to be audited by independent professional audit firms. Non-commercial SOEs should be audited by either the Auditor General or professional audit firms.

SOEs are subject to the same taxes, including value added tax, as their private sector counterparts. However, capital acquisition (motor vehicles, equipment, and machinery) is not subject to the same taxes. SOEs, particularly non-profit SOEs, also enjoy preferential access to land compared to private sector competitors.

In March 2016, the Government of Malawi clarified its dividend and surplus policy, requiring profit-making SOEs to pay 40 percent of dividends to the national treasury. SOEs that issue credit, such as, but not limited to, the Small-holder Farmers Fertilizer Revolving Fund (SFFRF), often refrain from collecting against outstanding debts. Private enterprises complain that these features distort Malawi’s markets.

Also important to note is that the government is the major consumer in the Malawian economy, but frequently fails to pay its bills, goes into arrears, and occasionally pays in zero-coupon bonds payable one to three years after issuance, presenting a significant challenge to sellers in the in-country market.

A list of these enterprises is available from the Office of the President and Cabinet, but Government does not publish the list in the media or online, nor can it be purchased from the Government Printer.

Private and public enterprises generally compete on the same terms and conditions for access to markets, credit, and other business opportunities, although in practice personal relationships can influence decisions heavily. There are exceptions for some public works assignments where public enterprises tend to be given special preference by government. There have been several instances in the past where public enterprises such as the Agricultural Development and Marketing Corporation (ADMARC) and the Small-holder Farmers Fertilizer Revolving Fund (SFFRF) have been awarded contracts to distribute subsidized agricultural inputs without competing with private sector enterprises. These SOEs also access cheap financing from government, acquiring an advantage over private companies in the agricultural sector. There are no set rules or criteria on such exceptions — the government tends to decide, often capriciously, on a case by case basis. In general, SOEs tend to get a bigger share of government contracts than privately-owned enterprises.

SOEs in the agriculture, education, and health sectors spend more on research and development than local private sector players and they are seen as doing so for the public good rather than for profit. Because local firms tend to be capital-constrained and because highly-skilled labor (such as research scientists and engineers) is scarce, there is not a strong tradition of private sector-led research and development in Malawi. This can affect government perceptions of foreign firms’ research and development activities.

Malawi’s SOEs are not required to adhere to the OECD Guidelines on Corporate Governance of SOEs. Corporate governance for most SOEs follows the terms of the relevant Malawi law that established the entity. All SOEs report to a line ministry and to the Department of Statutory Corporations in the Office of President and Cabinet, but also have a Chairperson and Board of Directors. The boards are composed of politicians and professionals typically appointed by the president to be directors. Boards usually also have senior government officials as ex-officio/non-voting members. The participation of members of the government as ex-officio/non-voting members on these boards, and of politicians as directors, creates a perceived and/or real conflict of interest.

**Privatization Program**

Malawi has about 60 remaining state-owned enterprises that are involved in commercial operations, particularly in the public utilities sector, agriculture, housing, finance, education, construction, energy, media, services, and aviation. With the recent privatizations of a bank and the national airline, the government does not have any plans for immediate privatization of any SOEs at this time.

All investors, irrespective of ethnic group or source of capital (foreign or local) may participate in privatization bids, however, the government may offer domestic investors a discount on shares.

Privatization efforts currently focus on public-private partnerships and attracting strategic investors rather than outright privatization. These are handled by the Public Private Partnership Commission (www.pppc.mw ), formed in 2013 to succeed the former Privatization Commission, which the 2010 Public Private Partnership Act and 2011 Public Private Partnership Policy rendered obsolete.

In 2013, the government sold a 49 percent share of the bankrupt national air carrier Air Malawi to Ethiopian Airlines, which resumed operations under the name Malawian Airlines. The Government of Malawi has officially announced plans to sell its remaining 51 percent equity share in the airline in the future but no date has been set. In 2015, the Government of Malawi sold a controlling interest in the Malawi Savings Bank and the government’s residual equity in IndeBank. Both foreign and domestic investors were invited to submit bids for these banks. The bidding was considered transparent and one of the banks drew offers from foreign investors, but equity in both banks was ultimately sold to domestic investors.

							8. Responsible Business Conduct					

There are no established laws or regulations governing Corporate Social Responsibility (CSR), nor does the government formally direct CSR to particular sectors. However, as part of its candidacy for the Extractives Industry Transparency Initiative, the GOM is working to address uses of responsible business conduct in the mining sector. It has until 2018 to implement local laws to ensure compliance with the EITI global transparency standard requiring extensive disclosure and measures to improve accountability in how oil, gas, and minerals are governed.

There are laws governing protection of the environment and waste disposal for producers and consumers. Government expects all enterprises to follow all laws of Malawi regarding employment and compensation. Malawi has a number of labor laws governing employment, work environment, industrial safety, age limits, hours of work, and minimum wages. The Government of Malawi lacks the resources to meaningfully enforce environmental, consumer, and labor related laws and regulations. There is no history of provisions of environmental, social, or labor laws being waived to attract investment. There is no history of the government factoring responsible business conduct policies or practices into its procurement decisions.

Government has enacted accounting standards that conform to international standards that the corporate sector is expected to adhere to. Executive compensations are not defined. All MSE-listed companies are required by law to publish their annual audited accounts in the local newspapers. Listed companies are also required to publicly declare their profits, dividends to be paid out, planned takeovers (or major portfolio investments in or out of the company), and all relevant information that shareholders need to make informed decisions. They are also required to announce their annual shareholders meetings in the newspapers.

There is a well-developed sense of corporate social responsibility in Malawi and most corporate entities make a point to publicize such activities in the local media. There are several civil society organizations that monitor and advocate freely for corporate social responsibility and responsible business conduct, including the Institute for Policy Interaction (IPI), the Catholic Commission for Justice and Peace (CCJP), the Centre for Environmental Policy and Advocacy, Institute for Sustainable Development, and Natural Resources Justice Network.

The Embassy is not aware of any efforts by the government to encourage adherence to OECD Guidelines for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas or any domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas.

							9. Corruption					

Malawi law prohibits bribery. Giving or receiving a bribe — whether to or from a Malawian or foreign official — is a crime under Malawi’s penal code. Public sector corruption, including bribery of public officials and conflicts of interest, however, remains rampant and a major challenge for firms operating in Malawi.

The law provides for criminal penalties for corruption by officials. There are regular reports of government corruption at all levels of government. Notably, 2013 saw the revelation of a massive national corruption scandal known as “Cashgate,” involving the theft of at least 20 billion MWK (then $49 million) through fraudulent transactions using the government’s automated payments system. More than 70 individuals were arrested including a former cabinet minister and the commander and deputy commander of the military. As of March 2017, all 12 defendants whose cases have come to an end have been found guilty. Many more cases remain to be prosecuted.

The Corrupt Practices Act established the Anti-Corruption Bureau (ACB) with a mandate of preventing corruption in Malawi. The ACB Director and Deputy Director are both appointed by the President, subject to confirmation by the Public Appointments Committee of Parliament. ACB began full operations in 1998, and in 2004 the Corrupt Practices Act was amended to give ACB additional powers. The definition of corruption was widened to include, among other things, offences for abuse of office and possession of unexplained wealth. The Act provides for the investigation of cases not only for corruption but for other offences that come to light during the course of investigating corruption. The Act also provides protection for “whistleblowers.” Malawi’s ACB cooperates with other anti-corruption bureaus in the region and beyond. In 2015, a deputy director of the ACB was murdered, likely due to his affiliation with the corruption fighting body.

Forty eight categories of public officers – including all levels of officials from the president and members of parliament, down to specific categories of civil servants, including traffic police and immigration officers – are required to declare their assets and business interests. The paper declarations are accessible to the public upon request.

The law does not extend to family members or to political parties. However, where evidence exists that the family members or members of a political party were complicit in corruption, the Anticorruption Bureau has the power to build a case against the accomplices and bring them to court.

The Public Procurement Act of 2003 requires all public officials to avoid conflict of interest in planning, preparing, and conducting procurement proceedings, and implementing procurement contracts. However, there is no clear definition of what constitutes conflict of interest and the law is not regularly enforced. In some rare cases, public officials that are seen to have deliberately flouted this provision are investigated and prosecuted. In November 2015, the Roads Authority Chief Executive Officer was suspended after a team of investigators found him guilty of awarding a $300,000 World Bank funded project to his own company.

Companies are encouraged to participate in the fight against corruption. The ACB encourages institutions to develop and implement Corruption Prevention Policy frameworks as a way of mainstreaming anti-corruption initiatives into their operations. Many companies have signed up to the anti-corruption campaign. Civil society organizations (CSOs) also formed their own institution called “Civil Society Action against Corruption” to deal with corruption within civil society.

The business sector has at times joined forces to collectively engage in the fight against corruption, but no formal mechanism exists.

Malawi is party to the United Nations Convention against Corruption, which it ratified in December, 2004.

According to Malawian law, citizens have a right to form NGOs focused on anti-corruption or good governance and these NGOs are free to accept funding from any domestic or foreign sources. Malawi’s civil society plays an important and visible role drawing public attention to governance concerns, corruption, development priorities, and government inaction on issues of national importance. The media also plays a central role in investigating and uncovering many cases of corruption including the “Cashgate” scandal of 2013 and more recently the “Maizegate” scandal which led to the firing of the Minister of Agriculture, Irrigation and Water Development.

Though the country’s laws provide for freedom of expression, government at times is discriminatory against organizations or media houses that are seen to be critical of government. In January 2017, the government, through the Malawi Revenue Authority, seized property and closed offices belonging to Times Group (one of two major print media houses in Malawi) over unpaid taxes after the paper unearthed evidence of corruption which led to the exposure of the “Maizegate” scandal.

Although progress has been made in addressing the issue, corruption continues to be viewed as a major obstacle to doing business in Malawi. There have been serious allegations of corruption, which is perceived to be particularly endemic in the following sectors: police, immigration, road traffic, tax administration, traditional leaders, and government procurement.

Resources to Report Corruption:

Contact at government agency or agencies responsible for combating corruption:

Mr. Lucas KondoweDirector GeneralAnti-Corruption BureauMulanje House, P.O. Box 2437, Lilongwe, MalawiTel: +265-1-772-107Fax: +265-1-770-108E-mail: lkondowe@acbmw.comWebsite: http://www.acbmw.com 

							10. Political and Security Environment					

Malawi continues to enjoy a stable and democratic government. Since the end of the one party regime in 1993, it has organized five peaceful presidential and parliamentary elections, one of which also included local government elections. International observers have characterized the presidential, parliamentary, and local government elections in Malawi as generally “peaceful, free, transparent, and credible.” The current President, Prof. Arthur Peter Mutharika, is in his first five-year term which started in 2014. The next elections are due in 2019.

Although divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could be expected to lead to violent confrontation. Incidents of labor unrest occasionally occur, but these are usually non-violent. There are no nascent insurrections or other politically motivated activities of major concern to investors. However, there have been some political tensions with neighboring Mozambique and Tanzania in recent years. Tanzania and Malawi are currently trying to resolve a border dispute over the north eastern portion of Lake Malawi.

In 2011, politically motivated demonstrations over fuel shortages, inflation, and unemployment resulted in the destruction of some local businesses and properties belonging to people that were affiliated to the Democratic Progressive Party which was in power at the time. However, the destruction was on a small scale and did not cripple the business community nor did it affect any major projects or installations in the country. In 2016, students from Chancellor College and Lilongwe University of Agriculture and Natural Resources, constituent colleges of the University of Malawi, damaged property belonging to the two universities after a decision was made to hike tuition fees by 69 percent. This resulted in the closure of the two universities and government imposing a damage repair fee of $2.00 on each student as part of the conditions to reopen the two institutions.

Malawi’s economy has performed very poorly in the past two years largely owing to vulnerability to climate induced shocks and fiscal management challenges. Real gross domestic product (GDP) grew by 5.7 percent in 2014, but slowed to 2.8 percent in 2015, and 2.5 percent in 2016 after two consecutive years of drought, which adversely affected the performance of agriculture, which accounts for about a third of the country’s GDP. The government continues to balance its efforts to restore fiscal discipline with its efforts to address Malawi’s food security needs.

Despite these challenges, the International Monetary Fund (IMF) expects the economy to pick up in 2017. The IMF expects the real GDP growth rate to pick up in the range of 4 percent to 5 percent in 2017 while the annual inflation rate fell to 16.1 percent as of February 2017 from an average of 21.8 percent in 2016. The consumption-lead recovery is expected to be driven mainly by a rebound in agriculture, wholesale and retail, and telecommunications.

							11. Labor Policies and Practices					

A large majority of working age individuals in Malawi lives in rural areas and is involved in subsistence agricultural. Unskilled labor is plentiful. Skilled and semi-skilled labor on the other hand is scarce. The informal economy has experienced a rapid expansion, and is characterized by worse working conditions, specifically less social protection, work safety, and lack of representation. It is estimated that the informal economy covers 89 percent of the labor force.

Child labor remains a serious and widespread problem in Malawi. The 2015 Child Labor Survey found 38 percent of children aged 5-17 active in child labor.

Occupational categories with skills shortages include accountants and related personnel, economists, engineers, primary and secondary school teachers, lawyers, IT, and medical/health personnel. The University of Malawi (a government-run university with five constituent colleges nation-wide) provides bachelors and masters degrees in economics, engineering, medicine, education, agriculture, and administration. The Malawi College of Accountancy teaches accounting. Chancellor College, part of the University of Malawi system, operates the country’s law school. The government also recently expanded its network of vocational schools to address technical skills shortages in the trades and the construction industry.

Malawi employment and immigration laws and regulations require that any local or foreign investor prioritize the hiring of nationals except in cases where the skills required to undertake certain task are not locally available. These laws and regulations are to a large extent enforced by the Department of Immigration when issuing Temporary Employment Permits to foreign nationals.

There are no restrictions on employers adjusting employment to respond to fluctuating market conditions so long as such adjustments are done in compliance with employment laws and regulations. Furthermore, labor laws in Malawi clearly differentiate between layoff and firing and have clear provisions as to how layoffs and dismissals are to be handled. However, there are no social safety net programs for workers laid off for economic reasons nor are employers required to have employment insurance for their employees.

There is no provision for labor laws to be waived to attract or retain investment in the country nor are there additional or different labor law provisions in the Export Processing Zones for the purpose of promoting manufacturing of export products.

Workers have the legal right to form and join trade unions. There are 20 unions affiliated with the Malawi Congress of Trade Unions with a membership of approximately 300,000 workers. Union membership is low, however, given the small percentage of the work force in the formal sector, the lack of awareness of worker rights and benefits, and a resistance on the part of many employees to join unions. In 2014, only 31 percent of people in wage employment belonged to a union.

The Industrial Relations Court (IRC) has original jurisdiction over labor disputes and other issues relating to employment. An aggrieved party may appeal the decision of the IRC to the High Court of Malawi but only on matters of law or jurisdiction. Otherwise, on matters of fact, the decision of the IRC is final and binding.

The Labor Relations Act (LRA) governs labor-relations management in the small Malawi formal sector. The Act allows strikes and lockouts for registered workers and employers after dispute settlement procedures in collective agreements and conciliation have failed. Employers, labor unions, and the government lack sufficient knowledge of their legitimate roles in labor relations/disputes.

Despite the enactment of the Gender Equality Act in 2013, discrimination against women remains pervasive as they continue to have lower literacy and education levels and less access to employment opportunities than men. Children in Malawi continue to engage in the worst forms of child labor, most notably in agriculture, including on tobacco farms. While the government is a signatory to the ILO Convention protecting worker rights, mechanisms for enforcing the provisions of the convention are weak. Serious manpower shortages at the Ministry of Labor result in very few labor inspections.

The Malawi government approved the National Employment and Labor Policy in January 2016. The government is also in the process of developing a National Child Labor Policy as well as the reviewing the Occupation Safety, Health and Welfare Act of 1997.

							12. OPIC and Other Investment Insurance Programs					

OPIC has partnered with a U.S Department of Agriculture program in Malawi and is preparing to sign loan guarantee facility agreements with two commercial banks in Malawi through the Agribusiness Investment for Market Stimulation (AIMS) Project. The loan guarantee facilities aim to increase agricultural trade through improving access to markets and financing. OPIC-supported equity funds also invest directly in Malawi’s agricultural sector. OPIC continues to explore potential opportunities in Malawi, including in the energy sector. Malawi has had an OPIC investment guarantee agreement since 1967.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

* Malawi National Statistics Office (http://www.nsomalawi.mw/ )

*Table 3: Sources and Destination of FDI*

Data not available.*Table 4: Sources of Portfolio Investment*

Data not available.

							14. Contact for More Information					

U.S. EmbassyEconomic and Commercial Section40/24 Kenyatta Dr.Lilongwe, Malawi+265-1-773-166LilongweECON@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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