US embassy cable - 05LILONGWE175

UNCLAS LILONGWE 000175 
 
SIPDIS 
 
 
STATE FOR AF/S ADRIENNE GALANEK 
STATE FOR AF/EPS MARY FLEMING 
DEPT PLEASE PASS TO USTR 
DOC FOR 4510/ITA/MAC/ANESA/OA 
 
E.O. 12958: N/A 
TAGS: ETRD, EFIN, MI, AGOA, Political, President 
SUBJECT: MALAWI UPDATE FOR PRESIDENT'S AGOA REPORT 
 
REF: STATE 24616 
 
1. Following is Embassy's update for the President's AGOA 
Report, as requested in reftel.  Embassy has also submitted 
this update via e-mail to AF/EPS Mary Fleming. 
 
2. Status: AGOA eligible, including for textile and apparel 
benefits. 
 
3. AGOA Trade and Investment: Malawi's exports under AGOA 
were valued at $27.6 million in 2004, representing 46 
percent of total exports to the United States. Most new AGOA- 
related economic activity in Malawi has been in the textile 
and apparel sector. 
 
4. Market Economy/Economic Reform/Trade Barrier Elimination: 
The government has made a basic commitment to the principles 
of market economics. It encourages both domestic and foreign 
investment in most sectors of the economy, without 
significant restrictions. The government continued to make 
progress in 2004 with its privatization program, under which 
it has sold off 64 of 110 companies targeted since 1996. 
Early in 2004, the International Monetary Fund (IMF) halted 
its Poverty Reduction and Growth Facility because of 
government overspending; after the installation of a new 
administration in May, fiscal discipline was quickly 
restored with help from an IMF Staff-Monitored Program. 
 
5. Rule of Law/Political Pluralism/ Anti-Corruption: Malawi 
held a peaceful presidential and parliamentary election in 
May 2004. International observers considered the election to 
have been free but have criticized its fairness. Malawi has 
an independent but overburdened judiciary.  The government's 
Anti-Corruption Bureau (ACB) has actively pursued public and 
private corruption since the new administration took office 
in May 2004, but its record for winning convictions has yet 
to be established. 
 
6. Poverty Reduction: Since 1981, Malawi has undertaken 
economic structural adjustment programs supported by the 
World Bank, IMF, and other donors. Malawi met HIPC debt 
relief criteria in December 2000 and has since developed its 
PRSP, which was launched in 2002. While Malawi continues to 
work with these institutions and to use the PRSP as the 
central planning document for government budgeting, a 
historic lack of fiscal discipline weakened growth and 
macroeconomic instability, limiting poverty reduction. 
 
7. Labor/Child Labor/Human Rights: Malawi's labor laws cover 
the majority of the ILO's core labor standards. Workers have 
the right to form and join trade unions. Unions must 
register with the Ministry of Labor, but this is largely a 
formality. A lack of capacity in the government and the 
unions reduces the effectiveness of worker rights 
protections. On child labor, Malawi's Constitution and 
employment laws comply with the ILO Convention 138 and 
Convention 182, but resource constraints - both human and 
financial - hamper enforcement. A 2000 Malawi Demographic 
and Health Survey estimated that 27 percent of Malawian 
children aged 5-14 were working - two-thirds without pay. 
The incidence of child labor on tea estates and tobacco 
farms is particularly high. The public-private Child Labor 
Task Force expanded its membership among labor, private 
sector, and NGO organizations. In 2004, the task force 
developed and implemented a national Code of Conduct on 
Child Labor and placed child labor officers in each district 
of the country.  Malawian children are trafficked to other 
Southern African countries and to Europe for purposes of 
forced labor and commercial sexual exploitation. There were 
some reports of the police beating and otherwise abusing 
detainees and using excessive force in handling criminal 
suspects. Lengthy pretrial detention was a serious problem. 
 
8. U.S. Mission Outreach:  In 2004, the U.S. Mission and the 
Southern Africa Global Competitiveness Hub trained the 
Malawi Handicrafts Association on identifying U.S. market 
opportunities and meeting U.S. buyers' product requirements.