Malawi low rating on economy to affect FDI

It never rains but pours for Malawi which is suffering from continued forex and resources supplies, as this time the World Bank statistics have shown that country’s rate to doing business is on the lower side.

The World Bank’s investment arm, International Finance Corporation (IFC) annually produced the ‘Doing Business’ report which analyses regulations affecting domestic firms in 183 economies and ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency, and trading across borders.

Kumwembe: Discussing the report

The bank’s 2012 Doing Business Index issued this week ranks, Malawi, out of 183 other economies, on number 145 which is a drop from the previous 141.

But this year, indicators have included on getting electricity.

This development means it will be much harder for international firms to commit foreign direct investment (FDI) in any venture in the country as among others its hard to register a business, acquire land and even availability of utility services such as water and electricity is very challenging.

A local analyst said such data from the World Bank puts the country further in a tight corner as it will be hard for the private sector to seek business partnership for growth and investments.

“The way things are now does not require and economic professor to deduce that the economy has gone south and with the new data from the World Bank, we are assured that foreign direct investments will be much lower than before. What we need now is the political system to stabilise the economy and ensure that procedures are followed to have better ratings, otherwise it will be hell in Malawi,” the analyst said.

But a report by The Daily Times indicates that Secretary for Industry and Trade, Newby Kumwembe wasn’t willing to comment on the new development as government needed a better understanding of how the ranking was done before commenting on the matter.

“We have seen the report and we are still discussing it,” said Kumwembe.

The report shows that property registration in Malawi became slower because the previous year’s improvement in the time for processing compliance certificates at the Ministry of Lands was not sustained.

Malawi improved its credit information system by passing a new law allowing the creation of a private credit bureau and was recognized for esolving of insolvency easier by adopting new rules providing clear lines of company liquidation processes.

Maritius ranks top for Southern Africa at position 23 then South Africa (35), Botswana (54), Namibia (78), Zambia (84), Seychelles (103), Swaziland (124), Tanzania (127), Mozambique (139), Lesotho (143), Malawi (145), Zimbabwe (171), Angola (172) and Democratic Republic of the Congo (178).

Singapore is the number one country in the survey seconded by Hong Kong SAR, China; New Zealand; the United States; and Denmark.

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