Integrating BIC Reforms into the PRSP in Malawi Johannesburg, 25th May 2006 Angela N. Zeleza, Economist Joana Henseler, Economic Advisor Ministry of Economic Planning and Development, MALAWI MALAWI

Presentation Structure Brief History of PRSP in Malawi Brief History of PRSP in Malawi Malawi Growth & Development Strategy Malawi Growth & Development Strategy Linkages between the MGDS and BIC/ EE Linkages between the MGDS and BIC/ EE The role of Public – Private Partnerships in the MGDS The role of Public – Private Partnerships in the MGDS Creating an Enabling Environment for PPP in Malawi Creating an Enabling Environment for PPP in Malawi

Brief History of PRSP in Malawi Interim PRSP (2001) Interim PRSP (2001) Full PRSP: Malawi Poverty Reduction Strategy (2002 – 2005) Full PRSP: Malawi Poverty Reduction Strategy (2002 – 2005) Malawi Economic Growth Strategy (2004)Malawi Economic Growth Strategy (2004) 3 Annual Progress Reports3 Annual Progress Reports 1 Comprehensive Review1 Comprehensive Review Malawi Growth & Development Strategy (2006 – 2011) Malawi Growth & Development Strategy (2006 – 2011) HIPC Completion Point: most likely summer 2006 HIPC Completion Point: most likely summer 2006

Malawi Growth & Development Strategy “the overall objective of the MGDS is to reduce poverty through sustained economic growth and development” “The main thrust of the MGDS is to create wealth through economic growth and infrastructure development as a means of achieving poverty reduction. This is expected to transform the country from being a predominantly importing and consuming nation to a predominantly manufacturing and exporting country.” His Excelleny, The State President of the Republic of Malawi

Malawi Growth & Development Strategy 5 Themes 1.)Sustainable Economic Growth 2.)Social Protection and Disaster Management 3.)Social Development 4.)Infrastructure 5.)Good Governance

MGDS Theme 1: Sustainable Economic Growth Sub-Themes: Maximising the contribution to economic growth through the sources of growth Maximising the contribution to economic growth through the sources of growth Enabling environment for private-sector led growth Enabling environment for private-sector led growth Food security Food security Regional integration Regional integration Economic empowerment Economic empowerment Land Land

MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Goal The goal for Malawi is to achieve increasing growth and diversification of business products and economic sectors while increasing the level of foreign and domestic investment and profitable enterprises. Strategy Address the infrastructure constraints – especially access to reliable and seasonally priced electricity, water and improved inter-modal transport to regional and domestic markets through direct investment, privatisation, and public-private partnerships; Address the infrastructure constraints – especially access to reliable and seasonally priced electricity, water and improved inter-modal transport to regional and domestic markets through direct investment, privatisation, and public-private partnerships; Ensure sustained macroeconomic stability; Ensure sustained macroeconomic stability; Improve vocational training through the current educational system, focusing on improving the TEVET system and updating equipment to meet international certification standards; Improve vocational training through the current educational system, focusing on improving the TEVET system and updating equipment to meet international certification standards;

MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Strategy (continued) Implement tax reforms; and Implement tax reforms; and Improve coordination for domestic and international investors to resolve problems that they face and to access information. Improve coordination for domestic and international investors to resolve problems that they face and to access information. For small and medium scale enterprises, specific strategies will need to be developed, including: Improving micro-finance schemes and programmes; Improving micro-finance schemes and programmes; Secure land registration and the functioning of land markets; Secure land registration and the functioning of land markets; Ensure Malawians have opportunities for jobs, especially in rural areas; and Ensure Malawians have opportunities for jobs, especially in rural areas; and Finally, related strategies in health will be coupled with efforts to improve occupational safety and labour protection. Finally, related strategies in health will be coupled with efforts to improve occupational safety and labour protection.

MGDS Theme 1, Sub-Theme 2: Enabling Environment for private-sector led growth Implementation Government will work with all relevant stakeholders including private sector support institutions and interest groups such as MIPA, MCCCI, NAG and other representative organizations to help align policies and programs to address the needs of the private sector Government will work with all relevant stakeholders including private sector support institutions and interest groups such as MIPA, MCCCI, NAG and other representative organizations to help align policies and programs to address the needs of the private sector Mechanisms for public-private partnerships will need to be strengthened Mechanisms for public-private partnerships will need to be strengthened Government will focus on public-private partnerships not only for the provision of infrastructure, but also for continuous monitoring of the private sector environment Government will focus on public-private partnerships not only for the provision of infrastructure, but also for continuous monitoring of the private sector environment

MGDS Theme 2: Social Protection and Disaster Management Sub-Themes: Protecting the vulnerable Protecting the vulnerable Improving disaster risk management Improving disaster risk management

MGDS Theme 3: Social Development Sub-Themes: Health and Population Health and Population Prevent the negative consequences of HIV/ AIDS Prevent the negative consequences of HIV/ AIDS Nutrition Nutrition Education Education Gender Gender

MGDS Theme 4: Infrastructure Sub-Themes: Transportation Transportation Energy Energy Water supply and sanitation Water supply and sanitation Information and communication technologies Information and communication technologies Science technology, Research and Development Science technology, Research and Development

MGDS Theme 5: Good Governance Sub-Themes: Macroeconomic stability Macroeconomic stability Public policy formulation, expenditure management and corruption Public policy formulation, expenditure management and corruption Decentralisation Decentralisation Developing a strong justice system and rule of law Developing a strong justice system and rule of law Security Security Corporate governance Corporate governance Human rights Human rights

The Role of PPPs in the MGDS Concrete Actions for which Government is planning to engage in PPPs: Infrastructure for key mining companies (water, electricity, roads) Infrastructure for key mining companies (water, electricity, roads) Rehabilitation and maintenance of port facilities Rehabilitation and maintenance of port facilities Electricity supply Electricity supply to name but a few…

Creating an Enabling Environment for PPPs INFRASTRUCTURE DEVELOPMENT Infrastructure Law Privatisation Process State Support Key Project Risks Identification Infrastructure Authority (Executive body) Conciliation Board (Quasi-Judicial body) Coverage–Infrastructure Sectors Sector Policies  Extent & form of PSP  Stand on identified Risk Issues  Sector specific Incentives  Regulatory Framework  Necessary Legal Enablers Model Concession Agreement  Contractual allocation of Risks, Roles and Responsibilities Integrated infrastructure plan Vision for the State Thrust areas Shelf of projects Integrated planning Sector level policy bottlenecks Investment requirement & State’s share of the investment Private Sector Participation (PSP) required

State support framework At the minimum ensure service level assurances for prompt approvals and clearances or grounds for denial Administrative Support Land & Infrastructure Support Tax & Duty incentives Credit Enhancements Direct Financial Support Timely Approvals; Construction power & water at site Undertake Resettlement and Rehabilitation measures Land at concessional prices Provision of supporting infrastructure for projects Bundling with suitable projects Tax & Duty incentives (central/ local) Exemptions from other license and registration fees Receivables Guarantee, Off take guarantees Forex guarantees, Credit guarantees, etc. Soft Loans Grants, Subsidies, etc. Decreasing order of Govt. preference: Direct impact on Budget

Form & extent of PPP PPP extended to all stages of infrastructure development Financing Designing Operating KEY BENEFITS Larger inflow of investment Better service standards Cost and operating efficiencies Lower burden on public finances Currently private sector mostly limited to construction through contracts

Zikomo Kwambiri! Thank you very much for your kind attention!