Service exports could help improve Malawi ’s Trade Balance

AS Malawi continues to chalk persistent Trade Balance deficits on her economic sheets, indications are that the country could do more if it tightened its grip a bit tighter over service exports.
The country has for the past two decades failed to reach the bench-mark 15.6 per cent of service exports for developing countries and has, instead, continued to hover below 11 per cent. This has translated into five or more percentage points below the set standard for most African countries.
An International Trade Centre (ITC) Capacity Study to Promote Exports of Services from Malawi , released on January 31, 2005, indicated that the country had the potential to make it big in, at least, nine areas.
These include accounting, auditing and book keeping; educational services; equipment leasing; health-related services; legal services; management consulting; peace keeping and security services; agricultural and medical research, and; tourism related services.
In spite of this potential, Malawi has continued to perform below par since 1995. While the export percentage for goods declined by negative-0.8 per cent (from 94.8 per cent in 1995 to 89.5 per cent in 2002), service exports only grew by 10.7 per cent (from 5.2 per cent in 1995 to 10.5 per cent in 2002).
During those years, travel and tourism grew from 3.7 per cent (in 1995) to 7.1 per cent in 2002 while transportation services (export) grew from 1.4 per cent to 3.4 per cent, among others.
This is also vindicated in International Monetary Fund Balance of Payment Statistics Yearbook (2004).
However, recent statistics from ITC indicate that the country has not improved much on service exports, despite indications that the area could help it cover up for some of its Trade Balance deficits.
“The average for developing countries is for services to be 15.6 per cent of total exports, and Malawi is considerably below that average,” says an ITC report, which also looks at Malawi ’s prospect for 2010.
It adds: “Under the next five years, the international context for Malawi ’s trade services will become increasingly liberalized, which will increase foreign competition for Malawi ’s service firms, both abroad and in the domestic market.”
However, indications are that the country was yet to attain this status- where the country’s service firms are much sought after both at local and international level. The proliferation of foreign firms in Malawi itself has resulted into wanton cries of exploitation that the Malawi Congress of Trade Unions, for instance, has since called for the deportation of all exploitative companies.
Most Malawians still go out to perform manual labour in such countries as South Africa, also, as the country still bathes in darkness over its unemployment rate. There is no official rate for unemployment, except sketchy details found in district strategic development plans.
This could explain why the Malawi Growth and Development Strategy does not explain anything about current unemployment rates, and, very much, the country’s blue print seeks to reduce such rates. The development ostensibly means the country can not calculate the overall value of its service exports, by looking at the number of skilled people who may help it offer services abroad, and how many need skilled training to compliment the labour force already contributing towards Malawi ’s service exports.
The Chikwawa District Strategic Investment Plan (2008-2015), for instance, indicates that only 10.7 per cent of the population is engaged in wage employment of some form or another while the national picture remains blank.
Globally, the most growing component of international trade has come to be that of ‘other services’. These are all services other than transportation, travel and government services.
Such services have grown at an average annual rate of 6.0 per cent since 1995.
ITC says Malawi’s ‘other services’ have included the export of professional services, business support services, educational services, financial services and health related services.
It, however, bemoans the general lack of information on the country’s ‘other services’ exports.
“It is unfortunate that there are no data on the volume of Malawi ’s ‘other services’ exports. (However) imports of ‘other services’ have increased from 1.7 per cent in 1995 to 4.1 per cent (in 2005) and have been growing at an average annual growth rate of 17.0 per cent since 1995,” says ITC.
Malawi has been exporting legal services to such countries as Belgium , Burundi , Canada , Ethiopia , Finland , France , Germany , Ghana , Greece , India , Italy , Japan , Kenya , Netherlands , Norway , Pakistan , Sudan , Switzerland , United Kingdom , USA , Zambia , Zimbabwe , among others.
The main importers of Malawi’s accounting services are Germany, Italy, India, Switzerland, South Africa, Sudan, Pakistan, among others, while the European Union, India, Pakistan are the main importers of architectural services.
ICT indicates that Malawi has also made some international in roads with such services as engineering, design services, medical services, midwives and nurses, computer services, agricultural services, equipment rental and leasing, property maintenance, among others.
Malawi ’s trade balance with the rest of the world widened by 31 per cent from K69.2 billion in 2007 to K90.4 billion during the 2008 trade year.
Government has, however, blamed the development on high crude oil and fertilizer prices. This forced government to dig dipper into depleted coffers as the two commodities continue to be some of the country’s strategic imports.
New Finance Minister, Ken Kandodo, has said the development was inevitable since government had to go ahead with the fertilizer subsidy programme but sees improved fortunes this year.
Trade balance is the difference in monetary value of a country’s imports and exports. Statistics indicate that, despite the potential to cover up for the country’s trade deficits, the country continues to consume what it does not produce, and import more than it exports.
This has incensed President Bingu wa Mutharika, who seems eager to shift the country’s focus from that of a net importer to one whose products and services saturate international markets. This has been government’s main policy goal for the past five years, a trend billed to continue- now that Mutharika has a legal cover of five more years.