Economic situation: The economic situation in Malawi is still relatively positive compared to neighbouring countries although growth has decreased from the very high levels between 1995-97. The economy is very dependent on agricultural exports, in particular tobacco and tea. The low rates of economic growth during the 1980s and the first half of the 1990s resulted in declining incomes per capita for a prolonged period. Income per capita in Malawi is among the lowest in southern Africa, and a large part of the population currently lives in poverty. Real wages and incomes have decreased almost continuously since independence, and very rapidly so during the first half of the 1990s. It is estimated that more than 3 million people face the risk of starvation as the country was hit by a severe famine caused by a poor harvest in 2000/01 resulting in low maize stocks (staple crop), a generally late start to the planting rains for the 2001/02 season, the flooding in several districts in 2002, and a dry spell early in 2002. Despite the famine the prospects for the tobacco are good and it is expected that the economy will grow by 1% in real terms in 2002 (in 2000 and 2001 the real GDP growth was 1.6% and 1.8% respectively). The rate of inflation as measured by year-on-year percentage changes in the all items national composite consumer price index was 18% in March 2002 compared to 18.9% in the presiding month and 28.8% in March 2001. The inflation rate is however expected to increase in the last quarter of 2002 due to the adjustments in the price of petroleum (from 29th April 2002 the pump price of petrol, paraffin and diesel was adjusted upwards), maize deficit (any imported maize to bridge the production gap is bound to be sold at a higher price than the domestic crop, fuelling the inflationary pressures), surtax extension and the suspension of donor funding. According to the 2002/03 national budget inflation is expected to average 9.5% in 2002. This however may be too optimistic given the above problems. The Malawian kwacha depreciated by 10% against the US in the first quarter of 2002. It has however gained stability since the start of the tobacco auction season (tobacco is the main source of foreign currency in Malawi) in April 2002. Inflows from tobacco auctions have allowed foreign exchange reserves to be built from the equivalent of 2.3 months of import cover at the end of March 2002 to 2.9 months import cover at the end of May 2002. The uncertainty surrounding donor inflows may cause the kwacha to further depreciate during the last half of year 2002. The rate of population growth is very high in Malawi. The intercensus growth rate increased from 2.9 per cent during 1966-77 to 3.2 per cent between 1977 and 1987. According to recent World Bank data, population growth in the 1990s has slowed down a bit to 2.7 per cent, which still puts an enormous pressure on the labour market and the availability of social services in the country. The government has maintained a favourable economic and political framework and thereby attracting external donor support, both with regard to the structural adjustment programme as well as in areas of democratisation and governance. As the absorption capacity is quite low, however, some donors are getting increasingly demanding on the input and commitment from the government of Malawi. Political and tripartite situation: The final years of the rule of President Kamuzu Banda in Malawi were characterised by a dramatic economic performance. Several external shocks, including two major droughts, as well as the unrest preceding the multiparty elections in 1994 resulted in very low economic growth at the beginning of the 1990s (less than 1.5 per cent between 1990-94; growth in 1994 amounted to minus 13 per cent). Since 1994, a programme of political and economic reforms has been put in place, featuring the familiar components included in IMF and World Bank sponsored adjustment policies. Previous attempts to implement such policies had not been very successful. The programme includes budgetary restraint, privatisation, civil service reform and liberalisation of the economy. One of the most significant reforms in 1999, as it directly affects the overwhelming majority of Malawians that live in rural areas, is the restructuring of ADMARC (Agricultural Development and Marketing Corporation). Dismantling of this organisation marks the shift from estate-led agricultural policies during most of the period since independence to the current focus on liberalising agricultural markets and small-scale agricultural development. The new policies aim at broad-based agricultural development, including deregulation, institutional reform and an improved structure of incentives. The president, Mr Bakili Muluzi, accepted the result of the July 2002 parliamentary vote, which decided that the constitution should not be amended to remove the limit on the number of terms a president can serve. The ruling United Democratic Front (UDF) will now focus on selecting a replacement for Mr. Muluzi to stand in the 2004 presidential election. The legislative election is scheduled for the same date as the presidential election and the opposition and the UDF appear to be preparing themselves. At present there are three main political parties in Malawi (UDF, Malawi Congress Party and Alliance for Democracy) and a number of smaller parties represented in the country’s National Assembly. For the long-term perspective a substantial step towards democratisation was taken in 1999, as a far-reaching policy on decentralisation has been adopted. Unfortunately the progress, since the approval of the policy, has been slow. Tripartism Although the social partners are not directly involved and mentioned in the policy the trend is positive for both the unions and the employers. Moreover, both institutions are weak even relative to other countries in the region, hence their ability to analyze, influence and advocate policies and policymaking is low. Institutionally, there is not a tripartite council. Social situation: Despite several years of impressive growth, poverty remains widespread in Malawi. On top of chronic malnutrition, severe gender imbalances, widespread child labour, very high rates of illiteracy, and a high population growth and pressure, Malawi has one of the world's highest HIV/AIDS infection rates. Only a small proportion of the labour force is employed in the formal sector of the economy. Although employment growth since independence has been substantial, from around 135 thousand in 1968 to more than 564 thousand people in 1995, the proportion of the labour force employed in the formal sector has remained tiny (less than 15 per cent). The growth rates in employment that were achieved during the first decade after independence have not been sustained. During the first half of the 1980s employment growth slowed down to a low average level (2.1 per cent), and has not shown much improvement since that time. More than three quarters of the labour force are small-scale subsistence farmers (mlimi). The majority of mlimi use simple technologies with low returns. Labour inputs for the dominant crop, maize, are concentrated in just four months, resulting in high seasonal unemployment. Moreover, smallholders face a variety of constraints, including declining soil fertility, a single rainy season, and a legacy of repressed entrepreneurship. Perhaps the most important constraints are the size of the landholdings and increasing pressures on the available land due to population growth. Informal non-agricultural employment, especially in urban areas, has traditionally been underdeveloped in Malawi. Although there has been substantial growth in commercial farming during the last 5 years, working conditions for low-level farm workers are still very poor. This is closely related to the pressure from large numbers of unemployed, which prevents salary increases and improved conditions of service. Linked to the high levels of poverty are substantial levels of child labour, both paid and unpaid. International Labour Standards: Ratification pace: Malawi has ratified a total of 23 Conventions, 16 of which in 1965 upon independence, 2 in 1966, one in 1971 and nothing after the four registered in 1986. A large number of the 1965/66 ratifications relate to instruments classed by the GB's Working Party on the Revision of Standards, as to be abrogated or shelved. Malawi has ratified all eight core Conventions of the ILO. ILO/SAMAT has actively been supporting the ratifications of these Conventions of which five of them have been ratified from 1998-2000. Conventions ratified by Malawi ILO Technical Cooperation:
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