Malawi Gets $15m Grant for Investment Climate Reforms to Accelerate Economic Growth

The reforms support the Government’s private sector-led growth strategy

WASHINGTON, May 24, 2007 – The World Bank Board of Directors today approved an International Development Association (IDA) grant of US$15million for the Business Environment Strengthening Technical Assistance Project (BESTAP) which is designed to support capacity development and investment climate reforms to accelerate economic growth in Malawi.

The project will support the Government’s strategy of a private sector-led economic growth. ”The foundations for economic growth have been laid in Malawi with improvements in the macro-economic situation, and this opportunity needs to be seized. The project aims to support the development of the private sector in Malawi as an engine for sustained economic growth,” says Malawi’s Country Manager, Timothy Gilbo.

The Malawi Government considers the project a major initiative in its economic growth program: “BESTAP is part of Malawi’s unprecedented efforts to accelerate economic growth and achieve poverty reduction through the improvement of the business environment and the facilitation of increased private sector investment,” says Dr. Ken Lipenga, Minister of Industry and Trade.

The Bank will co-finance the project with the European Commission which is contributing $3.7 million to make a total of $18.7 million for BESTAP. All the funding will be on grant terms, which means there are no repayment obligations for Malawi.

“Malawi’s strong progress in regaining macro stability means that the Government is increasingly looking to a “second generation” of reforms in the domestic business environment which will seek to stimulate private sector investment and employment creation,” says Constantine Chikosi, Project Task Team Leader. He adds that “the reforms proposed in the project were identified in consultation with Government, the private sector, civil society and donors, and were also informed by the Bank’s studies on private sector issues in Malawi such as Doing Business and the Investment Climate Assessments which identified a wide range of constraints on the growth o f the private sector in Malawi.”

The Project has four components designed to strengthen property rights institutions, private sector support institutions, growth and development of Small and Medium Enterprises (SMEs), and government capacity to implement reforms.

The first component is on strengthening private property rights institutions and business

facilitation. This will address the large legislative backlog of economic laws that inhibit private sector development in Malawi. Many of these laws require wholesale revision. This component will also support the introduction of key new legislation. The first component will also improve access to commercial justice by providing support for strengthening and expanding the capacity of the newly established Commercial Division of the High Court to relieve the current large backlog of commercial cases in Malawi’s court system and to strengthen contract enforcement. Another aspect of the first component is on improving business and land registration services. This will enable the business and land registries to improve their effectiveness in establishing businesses and facilitating the registration and securitization of land-based assets.

The second component is on strengthening private sector development support institutions and services. This component will build capacity in institutions that provide essential services to the private sector in order to improve the quality and volume of services delivered, and to strengthen institutions that provide policy direction on private sector development issues. Main activities will be the establishment of an Investment and Trade Centre; establishment of an institutional framework for Public Private Partnerships; strengthening the Department of Private Sector Development in the Ministry of Industry and Trade; and supporting a framework for Public Private Dialogue through the Malawi Confederation of Chambers of Commerce and Industry.

The third component will support the growth and development of micro and small enterprises through improved access to finance and productivity enhancement. The component will support the establishment of a sustainable SME Investment Fund that will be managed by the private sector. It will also strengthen capacity of private firms as well as their representative organizations through provision of financial and technical assistance to build the capacity and international competitiveness of private businesses.

The fourth component of the project will provide implementation support of the project through the project implementation unit (PIU). In addition, the project will build capacity within the Department of Private Sector Development to prepare it to take over the implementation support functions from the PIU in due course.

BESTAP will be implemented over a period of five years.

Source: World Bank

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