January 31, 2008

Country caught between two economic blocs

Malawi finally has to face up to the dilemma of choosing between being a member of the Southern African Development Community (SADC) or to stick with the Common Market for Eastern and Southern Africa (COMESA) if it is to continue receiving funding from the European Union (EU). International law expert George Naphambo said that Malawi was compelled to choose between belonging to either SADC or COMESA because aid from the European Development Fund (EDF) would be disbursed on the basis of membership to a regional economic community such as SADC or COMESA. According to him, a country could not receive EU funding from both bodies, which are two different regional economic communities, as this would mean the country has double access to funds compared to other states. "It is clear that if Malawi is to benefit from EU funding, it has to belong to one regional economic community -- unless the EU comes up with a formula for funding countries which belong to more than one such community," Naphambo said. He also stressed if this formula is not developed, there will be pressure on Malawi to leave either one of the bodies as soon as possible. "When push comes to shove, Malawi will have to make a decision because it cannot forego EU funding," said Naphambo.
Economic analysts in Malawi are recommending that the small southern African country is better off staying on in COMESA instead of SADC since the rules of origin in COMESA offer better market access than those in SADC. Rules of origin refer to the country-based exclusion of certain inputs that go into exports. SADC, on the other hand, is seen as outdoing COMESA as a major export destination, according to Andrew Kumbatira, executive director of the Malawi Economic Justice Network, the country's primary influential non-governmental organisation that promotes economic and trade justice. He recommends that Malawi should opt for COMESA since it offers a greater variety of economic dynamics than SADC.
Furthermore Malawians still await the details of the impending economic partnership agreement (EPA) which their government is entering into with the EU. Ten of the country's most influential non-governmental have embarked on various initiatives to signal their grave concern about the implications of the EPA for Malawi. In their latest statement, the NGOs feel "compelled to challenge the government in court for violating people's rights" if Malawi goes ahead with the signing of the EPA.
The organisations are: the Malawi Economic Justice Network, ActionAid Malawi, Malawi Health Equity Network, Maphunziro Foundation, Manerela, the Institute for Policy Interaction, Centre for Human Rights and Rehabilitation, National Smallholders Farmers Association of Malawi, Youth and Children Shield, and the Joint Oxfam Programme in Malawi.
By signing the EPAs, the government of Malawi would be "tying the citizens into 25 years of acrimony", said the organisations. The EPAs had been formulated in such a way that they would not benefit the people of Malawi nor add value to their ability to end poverty, the organisations stressed. "We alert the general public and civil society in Malawi not to fall for the intimidating and pressurising tactics that are being used by the EU to convince us that these EPAs are good for us," the organisations declared. According to the organisations, Malawi would need a capital injection of "a whooping 5.7 billion euros" to take care of supply-side constraints and other adjustment costs for the country to benefit from the proposed EPA trading framework. "Without such an injection, Malawi would remain the way it is -- with full exposure to the shocks that take place in the commodity market from time to time."
The NGOs pointed out that Malawi was party to the Lome' convention, a trade arrangement that gave preferential treatment to ACP countries's products between 1975 and 2000. However, during this period "our exports to the EU dwindled and supply-side constraints remain an issue for our industries. "What has changed to make us believe that these next 25 years with EPAs will be any different?" the NGOs asked. Another contentious issue is that Malawi has been asked to liberalise 80 percent of all trade with the EU. The NGOs see it as an erosion of policy and developmental space.
Malawi's parliamentary committee on trade has approved the signing of the interim framework agreement of the EPA in December. The temporary deal is aimed at averting disruption of trade between African countries and the EU, following the expiry of the Cotonou Agreement at the end of last year. The signing of the EPA was initially slated for the end of last year but ministers from the Eastern and Southern Africa (ESA) region, of which Malawi is part, said at the ESA-European Commission ministerial negotiating meeting in Brussels in November last year that it was not practical to do so. In the meantime, it has transpired that Malawi was due to sign an EPA on its own, leading the NGOs to say that Malawians are being misinformed as Malawi is not signing as part of a bloc of countries, as was originally envisaged.
The EPA would therefore put Malawi in direct competition with the EU at a time when Malawians were hopeful of rebuilding the jobs, industries and livelihoods that had been destroyed through that other imposed scheme, the World Bank's structural adjustment programmes, according to the NGOs. Secretary for Trade Newby Kumwembe only said that the government was weighing up the options of the trade agreement before signing it. "We need to look at all outstanding issues and make a decision. We also need to look at how our products will be affected if we do not sign this deal," said Kumwembe. (IPS)

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