A Comprehensive Analysis and Review of Investment, Production and Export Incentives in Malawi

The low contribution of manufacturing into Malawi’s GDP is due to the limited investments attracted in the sector over the past few decades. As the country aims at promoting private sector development and industrialize in order to become self-sufficient and reduce its reliance on donor support, it is imperative for Malawi to become a competitive destination for both domestic and foreign investment through, inter alia, the provision of a business friendly and enabling environment and strategic incentives for investments in the potential productive sectors. Many countries in the region have also sought to improve on their investment climate through the extensive use of investment and export incentives. The effectiveness of incentives in attracting investment is, however, unclear as little consensus has emerged from the ongoing debate. Some experts believe that incentives are ineffective in attracting foreign direct investment, while others argue that investment incentives contributed significantly to the rapid economic growth of countries such as Singapore, Mauritius, China and South Korea.

The literature suggests that investors are attracted by strong economic fundamentals in the host country. The most important of these include market size and real income levels, skill levels in the host economy, the availability of infrastructure and other resource that facilitates efficient specialisation of production, sustainable and socially / environmentally acceptable growth opportunities, trade policies, and political and macroeconomic stability. The availability of (serviced) land or business premises via lease or purchase at competitive prices, availability of reliable services such as water and electricity, access to business finance, access to information and capacity building measures especially for MSMEs, smooth and transparent procedures for business and other licenses play an important role as well, as do safety and security and general living conditions. For foreign investors fast and transparent processes regarding permits, visa and opening of bank accounts are also crucial. However, the location of investments may also be influenced by various incentives offered by governments to attract multinationals investors. These incentives may take a variety of forms. They include fiscal incentives such as tax holidays, lower rates and taxes for investors over a certain period of time, financial incentives such as grants and preferential loans to investors, as well as other incentives like market preferences and monopoly rights.

Although no reliable statistics of the size of these incentives are available, a detailed study by UNCTAD suggests that incentive activities have increased considerably since the mid-1980s. Empirical research shows that international investment incentives play only a limited role in determining the international pattern of foreign direct investment. Factors like market characteristics, relative production costs and resource availability explain most of the cross-country variation in investment inflows. Nevertheless, it is clear that international investment incentives might play a role for investment decisions on the margin. It is against this background that the Ministry of Industry and Trade is requesting for proposals to conduct a comprehensive analysis and review of investment incentives in Malawi to ensure that they generate the desired investments and exports.

The Ministry of Industry and Trade (MoIT) of the Government of Malawi in conjunction with the Malawi Investment and Trade Centre (MITC) is inviting Proposals from suitably qualified individuals for consultancy services to conduct a comprehensive analysis and review of investment, production and export incentives in Malawi with a view to proposing and developing strategic and catalytic investment, production and export incentives that could attract both domestic and foreign investors into the competitive productive sectors.

The consultant will work under the supervision and leadership of the Ministry and Industry and Trade (MoIT) and closely with the Malawi Investment and Trade Centre (MITC).

The specific tasks of shall include, but not be limited to, the following:

Conduct an industrial sectoral analysis in Malawi in order to determine the existing and potential viability of the various productive sectors that require government support through targeted incentives.

• Thorough analysis of the key productive industrial sectors in Malawi (Manufacturing, Sugar, Oilseed, Agriculture, Energy, Agro Processing,  Mining, and Tourism ) with a view to determining the production levels, share of products in domestic market, share of exported products, employment levels, potential for exports and import substitution, and the need for incentives to boost exports.

Provide a comprehensive review of the existing investment and export incentives and propose strategic incentives that could attract investment and develop exports in the country:

• Review the existing investment, production and export incentive schemes (including Industrial Rebate Scheme) to determine their effectiveness, administration and management by the government of Malawi. Determine the benefits of the current incentives to the industries and companies that are currently using them;
• Assess the weaknesses of the current tax incentives in boosting industrialisation sectoral development and export growth and development;
• Propose productive industrial sectors of the economy that require progressive incentives based on the outcome of the sector analysis above;
• Develop a package of strategic investment and export incentives for the identified competitive industrial sectors that have high potential to attract investments and develop exports in the country, reengineering the existing incentives regime by developing both financial and non-financial incentives.  The incentives regime to be developed must be non-discretionary, transparent, automatic, performance based and time bound. Additionally, the regime must be designed in a manner that promotes value addition in exports as opposed to exporting primary products. Finally, the incentives regime must promote development of ancillary industries around big projects such as mining projects, exploring the potential of developing Industrial Development Zones (IDZs);
• Develop guidelines for the administration of the strategic tax and non-tax incentives based on industry performance.
• Determine the bottlenecks of domestic entrepreneurs to identify specific incentives to target them;
• Determine levies that would be imposed on exportation of primary products to encourage processing and value addition, and ways to administer such levies.

Give a brief overview of the more general business attraction, retention and expansion options (‘…the provision of a business friendly and enabling environment…’) for Malawi as outlined above, and ways to achieve the realization of such options.

Suggest options on how to make the information on the incentives and other supporting measures package available to the targeted investors (e.g. marketing via website, brochures, participation in trade fairs).

Deliverables:

The consultant will be required to deliver the following:

• Inception Report, highlighting the approach to the assignment and critical areas of focus;
• Draft Report, detailing the analysed competitive industrial sectors that have high potential to attract investment in the Malawi economy, incorporating the outputs of the tasks outlined above and with reference to the methodology contained there-in;
• Draft Proposal of strategic investment, production and export incentives that target the identified competitive industrial sectors and export development in the country. The proposed incentives must be transparent, automatic, time bound and performance based; and comprehensive performance criteria for accessing the incentives;
• The Draft Report and Draft Proposal will be presented by the consultant to key stakeholders during a validation workshop that will be funded directly by UNDP (not to be included in the financial proposal);
• Final Report, including the strategic investment, production and export incentives.

• Display cultural, gender, race, and age sensitivity;
• Demonstrate integrity by modeling the United Nations values and ethical standards;
• Display comfort working in politically sensitive situations.

Functional Competencies:

• Have thorough knowledge of investment incentives, taxation, industrial policy and strategic issues relating to trade, private sector-led growth, with particular emphasis on development of manufacturing industries, and ability to undertake institutional and economic analysis both quantitative and qualitative;
• Have knowledge and understanding of theories, concepts and approaches relevant to private sector development, and investment promotion and industrial economics, with a focus on taxation and investment and export incentives;
• Have ability to conduct data collection using various methods with conceptual analytical and evaluative skills to conduct independent research and analysis, including  familiarity with and experience in the use of various research sources, including desk review, interviews, electronic sources on the internet, intranet and other databases;
• Have ability to apply judgment in the context of assignments given, plan own work, manage conflicting priorities and show pride in their work and in achievements. They must demonstrate professional competency and mastery of the subject matter;
• Must be conscientious and efficient in meeting commitments, and should observe deadlines and achieve stipulated results.

• Hold a minimum of Master’s Degree in Economics or Public Policy with a focus on industrial investment research; development economics research, industrial and investment policy development.

Experience:

• Have a minimum of 7years professional experience in the field of research including investment promotion with a proven track record of conducting similar assignments in the Southern Africa region, preferably relating to investment and trade promotion and policy research.

Language:

• Fluency in English.

Methodology:

Assignment Approach:

• Develop a Framework for the assignment to be agreed upon with the Ministry of Industry and Trade prior to undertaking the specific tasks required by the assignment. Preparation of an inception report (4 working days);
• Conduction field work and develop draft report and draft proposal (30 working days);
• Conduct a validation workshop (1 working Day);
• Develop final report (5 working days).

Desk Review:

• Review the various Taxation and investments and trade promotion Acts, including Customs and Excise Act, Export Processing Zone Act, Export Incentives Act, Investment and Export Promotion Act, VAT Act, etc;
• The National Export Strategy, Volumes I, II, and III as a basis for this assignment and extract all relevant issues pertaining to the productive sectors;
• Use the National Industrial Policy, Trade Policy and other sectoral policies as a guide in the policy orientation of the Government in its industrialization program;
• Review the Export Incentive prepared by Malawi Revenue Authority (MRA);
• Consult other relevant documents that provide information on investment incentives in Malawi and abroad.

Consultations:

• Conduct individual and group consultations that will involve one-on-one interviews and group discussions with relevant Government Ministries and Departments (for example, Ministry of Industry and Trade, Ministry of Finance and Economic Development), Academia, Technical Agencies,  Development Partners and the Private Sector that are directly or indirectly involved with industrialization in the country;
• Facilitate and conduct a validation workshop where a draft industrial analytical report and strategic production incentives report will be presented to a wider group of stakeholders involved.

Report Requirements:

• Before each payment, the IC will produce a progress report on his/her work;
• Before the final payment, the IC will produce a final report compiling all his/her deliverables.

Documents to be included when submitting the proposals:

Interested individual consultants must submit the following documents/information to demonstrate their qualifications by 31st of August 2015, by 17:00 pm to the following email address: procurement.mw@undp.org or apply on line www.jobs.undp.org

Technical Proposal:

• Explaining why they are the most suitable for the work;
• Provide a brief methodology on how they will approach and conduct the work.
• Personal CV (P11 Form) including past experience in similar projects and at least 3 references

Proposals must include all three documents. Proposals not meeting this requirement will be rejected. Please note that online submissions require scanning all documentation in one file as the platform allows for one attachment only www.jobs.undp.org

Financial proposal:

Contracts based on daily fee:

The financial proposal will specify the daily fee, travel expenses and per diems quoted in separate line items, and payments are made to the Individual Contractor based on the number of days worked.

Travel:

All envisaged travel costs must be included in the financial proposal. This includes all travel to join duty station in Lilongwe /repatriation travel.

Evaluation:

Individual consultants will be evaluated based on the following methodologies:

Cumulative analysis:

• When using this weighted scoring method, the award of the contract should be made to the individual consultant whose offer has been evaluated and determined as:
• Responsive/compliant/acceptable; and
• Having received the highest score out of a pre-determined set of weighted technical and financial criteria specific to the solicitation.

Technical Criteria weight; [70].

Financial Criteria weight; [30].

• Criteria A:  Educational background – up to a maximum of 10 points
• Criteria B:  minimum of 7years professional experience in the field of research including investment promotion with a proven track record of conducting similar assignments in the Southern Africa region, preferably – up to a maximum of 35 points
• Criteria C: Demonstrated knowledge and understanding of theories, concepts and approaches relevant to private sector development, and investment promotion and industrial economics, with a focus on taxation and investment and export incentives – up to a maximum of 25 points

Only candidates obtaining a minimum of 70 points in the Technical Evaluation would be considered for the Financial Evaluation

The financial score for the financial proposal will be calculated in the following manner:

Sf = 100 x Fm/F, in which Sf is the financial score, Fm is the lowest price and F the price of the proposal under consideration.

(Total Financial Maximum points = 100 points)

Total score:

The technical score attained at by each proposal will be used in determining the Total score as follows:

The weights given to the technical and financial proposals are: T= 0.7, F=0.3

• The Total score will be calculated by formula: TS = St x 0.7 + Sf x 0.3
• TS – Is the total score of the proposal under consideration?
• St – is technical score of the proposal under consideration.
• Sf – is financial score of the proposal under consideration.