malawi introduction investment climate doing business key sectors key takeaways

Malawi•Introduction•Investment Climate•Doing Business•Key Sectors•Key Takeaways

Introducing Malawi•Key Facts, Geographic and Demographic Highlights•Political and Economic Highlights•Resources and Infrastructure

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Key Facts, Geographic and Demographic Highlights

Population: 15,897,252 (July 2011 est.)Population: 15,897,252 (July 2011 est.)

World Population Rank: 63World Population Rank: 63

Population Growth Rate: 2.76%Population Growth Rate: 2.76%

Population Growth Rate Rank: 17 Population Growth Rate Rank: 17

Urban Population:

20%

Urban Population:

20%Rural

Population:80%

Rural Population:

80%

Sources: African Economic Outlook 2011 (Malawi); CIA World Factbook

IntroductionIntroduction Investment Climate

Doing Business Key Sectors Key

Takeaways

4,140,874 4,140,874

4,155,015 4,155,015

65 years and above

243,065

3,586,696 3,586,696

3,571,298 3,571,298

0-14 years 15-64 years

Literacy Rate: 76.1%

Literacy Rate: 49.8%

MA

LEFE

MA

LE

182,304

Malawi Key Facts

Area sq km 118,484

Capital Lilongwe

Languages Chichewa (official) 57.2%,Chinyanja 12.8%, Chiyao 10.1%, Chitumbuka 9.5%, Other 10.4%

Ethnic Diversity

Chewa 32.6%, Lomwe 17.6%, Yao 13.5%, Ngoni 11.5%, Tumbuka 8.8%, Nyanja 5.8%, Sena 3.6%, Other 6.6%

Religion Christian 82.7%, Muslim 13%, Other 4.4%

Currency Malawian kwacha (MWK)

Dialing Code

265

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Political and Economic Highlights



Takeaways

Sources: African Economic Outlook 2011 (Malawi); Unctad Stat

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Political and Economic Highlights

Sources: African Economic Outlook 2011 (Malawi); Unctad Stat; IMF



Takeaways

Exchange Rates ( June 2012)

100 MWK = US$ 0.370

100 MWK = INR 20.59

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Resources and Infrastructure



Takeaways

Railways 797 kms

Sources: AICD Report World Bank 2011

Total Road 15.451 kms

Paved 6,956 kms

Total Airports (with paved runways)

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Investment Climate of Malawi•Investment Scenario •Indian Investments in Malawi•Key Government Initiatives•Agreements and Associations

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Investment Scenario

Sources: UNCTAD World Investment Report 2011; Board of Investment

Investment Climate

Investment ClimateIntroduction Doing

Business Key Sectors Key Takeaways

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Indian Investments in Malawi

Investment Climate



Sources: Reserve Bank of India; Ministry of External Affairs, India; UNCTAD LDC Profile

Sectors attracting FDI from India (July 2007-May2011)

Total amount (US$ million)

Community Social and Personal Services

1.11

Electricity, Gas and Water 0.18

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Government Initiatives

Investment Climate



Source: Malawi Investment Promotion Agency

• Private investment in Malawi is regulated by the Investment and Export Promotion Bill 2012• The Act states that investors, both domestic and foreign are allowed to invest in any sector of

the economy, with no restriction on ownership• Further it puts no restrictions on the size of investment, the source of funds or whether products

are destined for export or for the domestic market• The Act also established of Malawi Investment and Trade Centre (MITC) which acts as a One-

Stop Shop Investment and Trade Centre for all investors and exporters

FDI Policy

The Malawi Government through Taxation Act, VAT Act, and Customs and Excise Act offers the following fiscal incentives:•100% Investment allowance on New and Unused Industrial Buildings ,Plant and Machinery•No Minimum Tax Based on Turnover•25 % Export Allowance on revenue for non-traditional exports •No Taxes on Gains from sell of Shares that are held for more than 1 year.•40% Investment Allowances for used Buildings, Plant and Machinery •Transport tax allowance of 25% on international transport costs, excluding traditional exports •Allowance for manufacturing companies to deduct all operating expenses incurred up to 25 months prior to the start of operations •Exemption of Duty, Excise and VAT on raw materials used in manufacturing • Exemption of Duty, Excise and VAT on Industrial Machinery and Equipments•Carry forward of loss, up to seven years, enabling companies to take advantage of allowances •Additional allowance of 15% for investment in designated areas of the country •Exemption of duty on importation of buses with a seating capacity of 45 persons and above•Exemption of duty on direct importation of goods used in the tourism industry

Tax benefits

There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments and lease repayments) as long as the capital and loans that were obtained from foreign sources and registered with the Reserve Bank of Malawi (RBM).

Repatriation of Capital

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Government Initiatives

Investment Climate



Legislation for the establishment of EPZs came into force in 1995. All companies engaged exclusively in manufacture for export can apply for EPZ status. As of December 2010, 16 were operating under the EPZ scheme. The incentives under this scheme include:

• Exemption of corporate tax • Exemption of withholding tax on dividends • Exemption of duty on capital equipment and raw materials • Exemption of excise tax on the purchases of raw materials and packaging materials

made in Malawi • Exemption of value added tax

Export Processing Zones (EPZ)

Manufacturing Under Bond (MUB) scheme offers incentives to those companies that export some, but not all, of their products. These incentives include:•Export allowance of 25% on revenue for non-traditional exports •Transport tax allowance of 25% on international transport costs, excluding traditional exports •Exemption of duties on imports of capital equipment used in the manufacture of exports •Exemption of surtaxes •Exemption of excise tax on the purchase of raw materials and packaging materials •Timely refund of all duties (duty drawback) on imports of raw materials and packaging materials used in the production of exports

Manufacturing under bond Incentives

• Malawi's constitution prohibits deprivation of an individual's property without due compensation. There are effective laws that protect both local and foreign investment

• The likelihood of direct expropriations has been further reduced since the repeal of the forfeiture act in 1992

Expropriation and Compensation

Source: Malawi Investment Promotion Agency

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Investment Climate



Agreements and Associations

Malawi is a member of/ signatory to the following:• South African Development Community (SADC)• Common Market for Eastern and Southern Africa (COMESA)• African Growth Opportunity Act (AGOA)

Regional Trade Regional Trade Associations and Associations and

BlocsBlocs

Important bilateral treaties and agreements are: • Memorandum of Understanding (MoU) on cooperation in the

field of Agriculture and Allied sector (2010) • Agreement on Protocol for Consultations (2010) • Agreement on Cooperation in the development of small scale

enterprises in Malawi (2010) • MoU on Human Resources and Development (2010) • Agreement for Mineral Resources Development (2010)

India extended a US$50-million Line of Credit (LoC) to Malawi in 2009–10 for its developmental projects. In February 2008, India extended an LoC of US$30 million for irrigation, grain storage, tobacco threshing and one-village, one-product projects.

India MalawiIndia MalawiRelationsRelations

Sources: UNCTAD WIR 2011; Ministry of External Affairs, India

Malawi is a member of/ signatory to the following:•Multilateral Investment Guarantee Agency (MIGA), which provides guarantee against non commercial risks•International Center for the Settlement of Investment Disputes (ICSID)

International International Investment Investment

Guarantees and Guarantees and AgreementsAgreements

The Government has concluded 9 DTTs as of December 2010.•These include DTTs with Sweden, UK, Denmark, France, Norway, Switzerland, Netherlands, South Africa and Norway

Double Taxation Double Taxation Treaties (DTT)Treaties (DTT)

Malawi has signed 6 BITs as of December 2010.•These include treaties with Taiwan, Malaysia, Egypt, Italy, Netherlands and Zimbabwe

Bilateral Bilateral Investment Treaties Investment Treaties

(BIT)(BIT)

Doing Business In Malawi•Investment Options•Investment Laws and Regulations•Investment Funding Options•Taxation

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Overview

Malawi ranks 145th on the 2012 World Bank’s index of 'Ease of Doing Business‘. Key reforms undertaken by the country during last one year include implementation of new rules providing clear procedural requirements and time frames for winding up a company, and adoption of a new law under which it would create a private credit bureau in the country.

Parameter Doing Business 2012 Rank

Doing Business 2011 Rank

Attractiveness

Starting a Business 139 132

Dealing with construction permits

167 167

Getting electricity 177 178

Registering property 95 80

Getting Credit 126 116

Protecting Investors 79 74

Paying Taxes 23 22

Trading Across Borders 164 163

Enforcing Contracts 121 122

Closing Business 132 131

Comparison of Malawi with regional economies on ease of doing business ranking

Ease of doing business rank of Malawi

1-46

47-92

93-138

139-183

Average doing business rank

Key Sectors Key TakeawaysIntroductionIntroduction Investment

ClimateDoing

BusinessDoing

Business

Sources: Doing Business, World Bank

15Sources: EY Analysis

Overview

Investment options

Investment funding options

Taxation

An investor can conduct business in Malawi using any of the following forms public/private limited company, partnership, sole trader and branch of foreign company. Foreign investors are required to register their amount of capital inflow with the Reserve Bank of Malawi through a commercial bank.

Important sources of finance in Malawi include commercial banks, stock exchange, microfinance institutions, leasing companies and discount houses. Informal financial arrangements also play a important role in the economy

Malawi’s tax regime is quite favorable towards foreign investors. Key taxes applicable in the country include personal income tax, corporate tax, withholding tax, value added tax and payroll tax.

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DOING BUSINESS IN MALAWI


ClimateDoing

BusinessDoing

Business

Investment laws and regulations

The Investment and Export Promotion Act 2012 regulates both investments and trade in Malawi. The country offers several investment and trade incentives under various legislations including the Export Processing Zone (EPZ) Act, the Customs and Excise Act, and the Income Act.

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Investment options


Taxation

A foreign investor in Ghana may form a trading company or may team up with a Ghanaian entrepreneur for a joint venture, usually in the form of a partnership or a limited company. The investor is required to register his/her business at GIPC and Registrar General’s Department.

An investor has several funding options in Ghana, including shares issuance on Ghana Stock Exchange, commercial loans, micro-financing, and low interest loans available through Ghana Venture Capital Fund.

Ghana has a competitive taxation system with corporate tax rate of 25% and maximum rate for personal tax rate at 25%.Other taxes in the system include rent tax, capital gains tax, mineral royalties and value added tax. A division of a foreign company is taxed like any corporate entity in Ghana.

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The Ghana Investment Promotion Center (GIPC) Act is the main law that governs investment in Ghana. Mining and oil and gas sectors are governed by a separate set of laws. Further, sector specific regulations exist for industries such as financial services, fishing and telecommunications.

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Sources: Malawi Investment Promotion Agency; EY Analysis

Investment Options


ClimateDoing

BusinessDoing

Business

through a commercial bank in Malawi.

An investor must invest at least US$50,000

Submit an application at the Malawi Investment and Trade Centre (MITC), accompanied by a complete business proposal. A non-refundable fees of US$200

or Malawi Kwacha equivalent shall apply for applying new investment license

Business incorporation procedures

MITC processes the application and sends it to Investment Approval Committee for appraisal and approval

Committee, if satisfied, issues an investment license. Upon approval, the investor shall be required to pay US$800 or Malawi Kwacha equivalent for obtaining an

Investment Certificate

Companies are required to register with the Registrar of Companies

Companies are also required to register with the Malawi Revenue Authority (MRA) for the payment of taxes

Open a bank account with a Malawi commercial bank. The account can be transacted after the completion of registration process

Investment Laws and Regulations


ClimateDoing

BusinessDoing

Business

Investment options


Taxation




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100% investment allowance on qualifying expenditure for new building and machinery

stage of investment.

The Government of Malawi encourages foreign direct investments by offering several

Allowance up to 40% for used buildings and machinery

Allowance for manufacturing companies to deduct all operating expenses incurred up to 25 months prior to the start of operations

Free repatriation of dividends, profits and royalties

General incentives for investors

100% exemption of corporate income tax

No withholding tax on dividends

No duty on capital equipment, machinery and raw materials

0% value added tax

Key incentives under the Export Processing Zones Act

Sources: Malawi Investment Promotion Agency; EY Analysis

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Key Sectors Key TakeawaysIntroduction Investment

ClimateDoing

BusinessDoing

Business

Investment Funding Options

Drivers`

Stock MarketEstablished in 1994, the Malawi Stock Exchange (MSE) started equity trading in late 1996. As of March 2011, the MSE listed shares for one foreign and 14 national companies

Microfinance Institutions

Micro-finance in Malawi is still in its early stage of development. The country has several microfinance institutions (MFIs) including:•Malawi Rural Finance Company•Small Enterprise Development Organization of Malawi (SEDOM)•Credit Cooperatives (MUSCCO)

the economy due to low penetration of financial services, especially in the rural regions.

Banks

Around 11 commercial banks operate in Malawi, with the three largest banks accounting for over 60% of the sector’s deposits and assets. Some of the important banks in the country include:•National Bank of Malawi Limited•Standard Bank of Malawi Limited•First Merchant Bank of Malawi Limited•Nedbank

Investment options


Taxation




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Sources: IHS Global Insight; EY Analysis

Key sources of finance

Others

Other financial institutions offering financing facilities include leasing companies (such as Leasing and Financing Company Limited) and discount houses (such as First Discount House Limited, Continental Discount House Limited)

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Taxation

Investment options and business registration

process



Taxation and business environment

Key forms of business enterprises in Kenya are partnerships, sole proprietorships, co-operatives and branch offices. Private LLC is the most favored vehicle for foreign investors, as the tax payable is less than that for a foreign branch.

A foreign investor has several financing options in the country. Key sources of finance include commercial banks, microfinance institutions, stock issue, and development banks.

The Foreign Investments Protection Act (Chapter 518, Laws of Kenya)seeks to protect foreign investment made in Kenya. Clearance is required from parent ministries for investments in restricted areas before KIA approval is granted.

Kenya has a developed taxation system, and offers several fiscal incentives to foreign investors. Capital deductions are available on industrial buildings, hotels, plant and machinery and mining investment.

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ClimateDoing

BusinessDoing

Business

Key Taxes

Type Rate

Corporate Income Tax Standard rate of 30%; investment income of pension funds is subject to tax rate of 15%

Foreign branch tax 35%

Value-added tax 16.5%, however, banking and life insurance services are exempted

Dividends withholding tax 10% unless reduced under an applicable tax treaty

Interest withholding tax20% applies to residents; 15% applies to interest payments made to non-residents, unless reduced under an applicable tax treaty

Royalties withholding tax 20% applies to residents; 15% applies to interest payments made to non-residents, unless reduced under an applicable tax treaty

Personal income tax First MWK180,000 income is tax free; thereafter, next MWK is taxed at 15% and excess at 30%

Payroll tax1% tax-deductible levy of payroll costs is payable to Technical, Entrepreneurial and Vocational Education and Training Authority

Sources: EY Analysis; IHS Global InsightExchange rate: MWK1 = US$0.00596

Key Sectors•Agriculture •Mining and Quarrying•Manufacturing•Tourism

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Key Sectors

Key Takeaways

Key TakeawaysIntroduction Investment

ClimateDoing

Business Key Sectors

Sources: EY Analysis; African Statistical Yearbook 2011; African Economic Outlook; Malawi Investment Promotion Agency (MIPA)

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Key Sectors

Key Takeaways


ClimateDoing


Domestic: 83%

Foreign: 17%

Supply chain: 26.8%

Investment: 4.2%

Government collective: 2.3%

The total contribution of travel and tourism to GDP in 2011 was 3.7% in

2011

Economic contribution of Travel & Tourism in 2011

Sources: EY Analysis; African Statistical Yearbook 2011; African Economic Outlook; Malawi Investment Promotion Agency (MIPA); Malawi Tourism Association; WTTC

Key Takeaways•Investment opportunities for Indian Investors•Key Contacts

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Investment opportunities for Indian Investors

Key Takeaways


ClimateDoing


UK

TOP INVESTORS

INDIA

UAE

SPAIN

US

FRANCE

POTENTIAL SECTORS FOR INVESTMENTS

Sector Sub SectorsAgriculture • Cash crops,

particularly tobacco

• Farm crops

Mining and Quarrying

• PGM’s• Uranium• Other minerals like

coal, bauxite etc

Manufacturing • Agro-processing• Textile and

garment manufacturing

• Light manufacturing

Travel and Tourism

• Eco-Tourism

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Organization Address Web address Contact details

Malawi Investment and Trade Centre (MITC)

Lilongwe OfficeAquarius House – First floorPrivate Bag 302Capital City Lilongwe 3

Blantyre OfficeUnit House – Fourth Floor Private Bag 131Blantyre

E-mail : [email protected]:www.malawi-invest.net

Tel:+265-1-770-800/ 265-1-771-315Fax:+265-1-771-781

High Commission of the Republic of Malawi in India

C-6/11, Vasant Vihar,New Delhi – 110057

Email: [email protected]

Tel: +91-11-26706000Fax:+91-11-26706010

Key Takeaways


ClimateDoing


Key Contacts

mailto:[email protected]

malawi introduction investment climate doing business key sectors key takeaways

Documents

malawi key facts

population growth rate

republic of malawi

urban population

rural population

gdp growth rate

president of malawi

political scenario malawi