1. FEATS Project AGRICULTURAL PRODUCTIVITY, TRADE AND TRADE FACILITATION By Lawrence Mapemba University of Malawi Bunda College 21st February, 2011 GENEVA, SWITZERLAND

2. Objectives and Methodology Overall objective is to examine the linkages among agricultural productivity, trade and rural livelihoods Field survey was conducted - farms, companies and organizations that are involved with production, processing and exporting of tradable crops were visited to collect information about their operations and constraints and policy issues that affect their operations.

3. AGRICULTURAL PRODUCTIVITY There has been an increase in productivity of major agricultural tradable crops in the past decade although in some years, yield was affected by unfavourable rainfall The increased productivity has been due to government’s effort through the introduction of different interventions that aimed at increasing land productivity by smallholder farmers such as farm input subsidy program, promotion of organic manure, intensive extension methods and promotion of high yielding varieties The availability of policies and strategies that targeted smallholder farmers and the agricultural sector as a whole, have influenced the increase in crop productivity

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10. landlockedness

11. Government policies (especially tax policy)

12. low rates of adoption of good crop husbandry practices

13. Low input usage

14. Most farmers not applying recommended rates - yields and quality highly compromised

15. Difficult to access agricultural inputs e.g. fertilizer, remote farmers

16. Poor soils due to over cultivation on same piece of land

18. Landlockedness and Trade Facilitation Aggravated by the country’s lack of diversification of exports and imbalances between imports and exports seasonality of the country’s exports, it is difficult for transporters to arrange return load which would help to reduce the transport cost For example, it costs $35 per tonne to transport sugar to Beira with backhaul as compared to $60 without back haul Shortages of vehicles during some periods of the year particularly during tobacco marketing period vehicles are committed to transporting tobacco Industries like cotton have complained of lack of vehicles as the industry cannot offer competitive rates as those offered by the tobacco industry

19. Landlockedness and Trade Facilitation Estimated by TERA International Group Inc. that in 2003 Malawi paid US$60.7 million for transportation of exports Time costs add about 3% - total transaction cost to be US$ 78.9 million transport cost for imports was estimated at US$129.3 million For these reasons, government has put trade facilitation as a major element of its economic policy Under the World Trade Organisation (WTO) negotiations – Doha Round Under the regional trade agreements (RTAs) that Malawi is a party to

20. On-going/planned corridor development projects Government has also identified other new corridors which are considered to be more efficient than the existing ones Mtwara Corridor and the Shire - Zambezi waterway Mtwara corridor is a multi-modal transport corridor which seeks to link Malawi to the Indian ocean by rail from the port of Mbamba bay on Tanzanian side of Lake Malawi to the port of Mtwara The plans are that goods destined for Malawi will be offloaded at Mtwara port and transported to Mbamba Bay by rail then ferried by ship to various destinations along Lake Malawi there has not been much policy talk about the project

21. On-going/planned corridor development projects Shire Zambezi waterway which is expected to link Malawi to the India Ocean through the rivers of Shire and Zambezi to the port of Chindi in Mozambique used to be the communication and trade route for the white settlers during the colonial era Goods destined to and from Malawi will be transported from the ports of Beira and Nacala by bulges all the way to Nsanje from where goods will be transported by rail to various destinations including Zambia, Democratic Republic of Congo, and Zimbabwe It is expected that the route will reduce Malawi’s cost of production by over 50% The success of this project largely depends on the cooperation of the Mozambican government

22. Effect of landlockedness on export decision Favourable agronomic conditions for production of a range of tradable agricultural commodities Realizing the high risk associated with the dependence on a narrow export base potential for production and export include cotton, coffee, ground nuts, pigeon peas, beans, macadamia nuts, cashew nuts, soya beans and paprika Although maize food security also a crop with export potential their production volumes still remain low productivity problems problem of competitiveness at regional and international markets

23. Effect of landlockedness on export decision Agricultural exports from Malawi compete for the same buyers Being a small producer of these commodities, Malawi is a price taker on international market the high transaction costs which the country faces due to its landlockedness cannot be factored into the price of its exports These costs are transferred to the producers by the intermediaries the low returns, the producers are less motivated to produce these crops The estate subsectornot cultivate maize, beans, soya beans, and ground nuts significantly Therefore important to address the problem of high transport cost through improvement in transport efficiency exploration of cheap transport routes would increase the returns to the farmers and therefore motivate them to produce and export more

24. Agricultural Trade and Trade Facilitation Agricultural commodities are by their nature highly perishable requires a good handling system including efficient transport system to markets long distance to seaports as outlets to international market puts Malawi at a big disadvantage In transit the cargo is subjected to checks and inspection which further contribute to long delivery period of the cargo only export products which are less time sensitive Malawi’s nuts have been denied entry into the European Union market allegedly due to high aflotoxin levels According to Illovo Sugar Company, the costs of sending sugar consignment to Beira and Nacala averaged US$60/ton in 2006/7 and the cost has since increased to US$70/ton

25. Agricultural Trade and Trade Facilitation There are plans to rehabilitate the rail way system including the 77 Km section of the rail to Nacala The customs documentation has been streamlined such that currently importers/exporters use a single customs document The Malawi Revenue Authority (MRA) computerised some of its border posts - speed up clearance of goods - plans to computerise all key border posts SADC and COMESA are implementing trade facilitation schemes as part of their regional integration programmes

26. CONCLUSIONS Improved agricultural productivity has improved agricultural trade performance For crops that have direct benefits to rural livelihoods, the trade has improved the livelihoods of smallholder farmers For some cash crops no improvements in incomes of smallholder farmers - poor market systems and no value addition Research exploitation of smallholder farmers Deliberate policies by government - improve farmers livelihoods

27. Recommendations-productivity Identify financing agency to loan tea farmers to uproot old tea and establish plantations of hybrid tea Extension-Research-Farmer linkages should be strengthened at a platform level Promote irrigation in tea farming to improve land productivity on both commercial and smallholder farmers

28. Recommendations-Trade Facilitation Government to work on improving the railway between Malawi and Mozambique Shire-Zambezi waterway Malawi should continue dialogue with Mozambican counterpart Government put in place mechanisms to ensure no siltation of the waterway

29. Recommendations-Trade Facilitation The government to work with countries in COMESA and SADC regions - port and rail related problems delay shipping Coming up with efficient and effective means of clearing goods Malawi’s trade should invest in research and development - competitive advantage e.g. Kilombero rice which is a speciality of Malawi

30. Recommendations-General There is need for a sample survey of large scale and smallholder farmers cultivate of tradable crops Study their levels of production, extent of involvement in trade, livelihoods and general constraints Study domestic market The threat of burley tobacco necessitates extensive policy research in feasible alternatives NOW Biofuel crops like jatropha Other tradable crops that have an expanding market Institute studies on exploitation of farmers Value-addition necessary for some tradable crops

31. Questions?