(NYASATIMES) When a builder contradicts architect’s plan: Case of Malawi economic recovery plan implementation

COMMENT - An admission that state intervention is what neoliberal freetaders turn to when the going gets tough.

When a builder contradicts architect’s plan: Case of Malawi economic recovery plan implementation
By Gerald Mabveka
October 23, 2012

The Government’s initiative to put in place an initiative to rescue our economy is commendable. Whilst the Government should be commended for this it is saddening to note that it is making decisions that are in clear contradiction with the Economic Recovery Plan (ERP).

So far, there have been a number of shortfalls observed about the ERP. These include the fact that the ERP is short of tangible specifics1. Further to the shortfalls, are the contradictory actions being taken by the Government recently.

One notable contradictory action the Government has made so far is the intervention in the fuel pricing mechanism. On fuel pricing the ERP clear states that, “…Over the past years the Government has been controlling fuel pump prices. This meant subsidizing fuel when international prices rise and thus accumulating deficits in the Price Stabilization Fund (PSF) hence posing a risk to the budget. To eliminate this risk, the country returned to Automatic Pricing Mechanism (APM).”2

The forgoing statement is clear on the effect of controlling fuel price. It is sad to note that within the short term period of the implementation of the ERP the Government has chosen to contradict its own plan. As usual, the Malawi Energy Regulator Authority (MERA) was pressurised to find a reason for the fuel price hike reversal so that the power within the Government should not been to have remote controlled the professionals at MERA.

At the economic recovery launch, Vice President Khumbo Kachali and the economic planning minister Atupele Muluzi

One may indeed conclude that politicians do not necessarily learn from past mistakes. Rather, they try the same mistake and only try to create a reason for doing the same past mistake. This is a clear indicator that the Government has not yet made its mind on the path the country should take to the so lauded economic recovery path.

It is also sad to note that in the interest of keeping our jobs, the professionals do allow to make decision that they themselves know that is wrong. Then one questions whether we are really professionals.

The Malawi Confederation of Chamber and Commence and Industry (MCCCI) has warned the Government of contradicting with its own pronouncement on its plan on the sick economy. The MCCCI has defined this action a clear interference by the Government in our economy.

[The 'sick economy' is the result of economic sanctions and ending budget support, in retaliatio against President Bingu wa Mutharika, because he supported President Mugabe and extended a $20 million loan to Zimbabwe so they could buy Malawian maize. President wa Mutharika also proved the foolishness of the IMF's insistence on the state not aiding the economy, when he proved the success of a simple fertilizer support program to farmers. - MrK]

It is like a patient guardian who tapers with a drip of quinine in a hospital ward an action which threatens the patient’s life. What it means is that the Government’s action will bring more an uncertainty onto our business market which will make Malawi unattractive investment destination for the investors who this country badly needed forty five years ago than today. This interference in the fuel pricing is a carbon copy of what the Government was doing with the foreign exchange rate i.e. fixing the exchange rate.

[This is typical neoliberal pablum. At some point you have to admit was works and has worked, and that letting the market set the rates only leads to more inefficiency in service delivery and availability of goods to ordinary people. - MrK]

One may conclude that the Government interfere in the fuel price implementation was solely made on political grounds. The Government may have done this to gain popularity.

Oh no, they are doing what the people want, instead of what the IMF and World Bank (JP Morgan Chase, State Street Corporation, etc.) want. - MrK

However, one thing is known that the Government will only postpone the price implementation. But one day it shall be implemented and it shall bit ruthlessly the way the procrastinated decision on foreign exchange has bitten us.

The Weekend Nation of 20th October 2012 says come November 2012, we should expect a double pain. That is, if the expected price in October was to increase by 10%, we should expect that November price increase will be above 20%. It has been established that the fuel industry will lose MK 1billion in October alone as a result of the price hike reversal.3 This decision contracts with the ERP as it makes our business environment unattractive to our current investors and the much needed more investors. What picture or indictor the Government is giving to the investors it wants to attract to remain in business and to come in?

It is too soon to start making policies in conflict with the ERP that the Government is trying to make people believe that it is serious in recovering the economy. One can agree with the argument by Matchaya (2012)4 that our Government seems not to have a full comprehension of what the problems the country is facing. As a result, one may agree with those people who say the Government is not sure of what it wants to do is just in a trial and error business.

It is sad to note that the above discussion is only mainly on what it claim to be in the short term reforms. The EPR states that, “Benefits of implementing the short term activities outlined …, would flow into the medium term”. But with the way how the Government is or has been implementing the short term reforms of the ERP, one wonders if the pronouncement made at the start of a presentation ofmedium term reforms will be realised considering that so far Government has made decisions that are in conflict with its own aspirations outlined in the ERP.

The Government should demonstrate through its action that ERP is really is plan for the nation by ensuring that it accommodates suggestions aimed at making it a best tool for the recovery of our economy. Further to that, the Government must ensure that its actions do not contradict with its own plan. I believe that the intention for having the ERP is good what is missing is to actualise the intention through an improved ERP and walk the ERP.

*The author Gerald Mabveka is Principal Regulatory Officer (PRGO) in the Office of Director of Public Procurement but writing in his personal capacity.