Schedule (Section 2)
Statement of Investment Policies
1.This policy statement sets forth the Malawi Government's principal policies for encouraging and assisting private investment. The Government is fully committed to enacting these policies and will take whatever measures may be necessary to ensure their prompt implementation. This statement is supplemented by the Investors Guide containing detailed information of importance to investors.2.The Government seeks to encourage the private sector to assume the leading role in developing the national economy. The thrust of the Government's efforts will be to facilitate, rather than to regulate, private investment. This is consistent with the Statement of Development Policies issued by the Government in 1987.3.To create a more conducive investment climate, the Government will continue to pursue stable macro-economic policies by exercising fiscal and monetary discipline and maintaining a realistic exchange rate of Malawi Kwacha (MK), the country's currency. Specific measures to deregulate the private sector and create new investment opportunities have already been enacted, including elimination of price controls, termination of import restrictions and of the accompanying need import licences, divestiture of state-owned companies and steps to rectify the external transport situation.4.To further encourage and assist private investment, the Government announces the following new initiatives:Freedom to invest
5.Investors, both domestic and foreign, may invest in any sector of the economy, with no restriction on ownership. Further there are no restrictions on the size of investment, the source of funds or whether products are destine for export or for the domestic market. Domestic investors are encouraged to join with foreign investors to pursue investment opportunities in Malawi.Industrial licensing and company formation
6.The industrial licence is to be eliminated, except for investments in such industries as the Government may place on a short negative list Procedures for company formation and business registration will be simplified to permit prompt establishment. Investors will only be required to provide the Registrar of Companies with basic information on proposed business activities.Transfer of land
7.The Government is committed to ensure that land for industrial and commercial uses is readily available to investors. Accordingly, the Government will accelerate land transfer procedures to expedite granting approvals and consents. To better provide serviced land to investors, the Government will develop new industrial sites. In addition, the Government will provide the necessary framework to enable private investors to develop industrial sites, including sub-leasing to other investors.Taxes and duties
8.To further enhance Malawi's investment climate and international competitiveness, the Government is committed to continue the process of reducing rates of taxes and duties. This is to be achieved through the ongoing tax and trade reform programmes.External transport routes
9.The Government is aware that access to efficient and secure transport routes, both within the country and to foreign markets, is of vital importance. To ensure such access, the Government is undertaking a number of initiatives, including the expansion of the domestic transportation network, the development of the Northern Corridor route to the port of Dar-es-Salaam in Tanzania and the rehabilitation of the Nacala Railway Line to the port of Nacala in Mozambique.Availability of foreign exchange
10.The Government recognizes that the availability of foreign exchange is critical to investors. The Government will, therefore ensure that foreign exchange is available for business transactions and remittances. The Reserve Bank of Malawi has granted, and will continue to grant, commercial banks the authority, as foreign exchange dealers, to approve such transactions and remittances according to set procedures.Access to local financing
11.The Government has embarked on a reform programme to modernize and liberalize the financial sector. With the enactment of the Capital Market Development Act, 1990, both foreign and domestic investors will have greater access to sources of local financing The Government is committed to foster competition in the banking sector including the establishment of new banking institutions.Labour practices
12.The Government will not interfere in employer's choice of workforce. Further, the Government recognizes that investments may require expertize not available in Malawi. Accordingly, it will continue to make Temporary Employment Residence Permits for expatriate personnel readily available for key positions in investments.Encouragement of small-scale and medium-scale enterprises
13.Malawi's small-scale and medium-scale enterprises hold great potential for rapid economic growth and employment creation. The Government is, therefore, dedicated to continuing with various programmes to assist these enterprises, including entrepreneurship training and technical and financial assistance.Encouragement of export-oriented investments
14.To encourage export-oriented investments, the Government will offer incentives competitive to those found in other countries. At present, these incentives include—(i)an income tax allowance based on export sales of non-traditional products (i.e. products other than tobacco, tea, sugar and coffee);(ii)rebates of import duties, surtaxes, and local taxes on most inputs used in production for export.15.In addition, the Government is considering establishing other incentives, including export financing and guarantee schemes, further developing a manufacturing-in-bond programme, creating export processing zones, and introducing measures to eliminate the payment of duties at the time of importation.Investment assistance and promotion
16.In order to increase awareness of the investment opportunities in Malawi, as well as to provide greater assistance to existing and potential investors, the Government has established an investment promotion agency. This agency has been given sufficient authority and operational autonomy to fulfil its mandate of promoting investment and assisting investors.Investment protection
17.The Government recognizes that the security of assets is of primary importance to investors. The Malawi Constitution and existing laws and regulations provide further assurance that investors' assets are protected. In addition, the Government will actively pursue the process of concluding bilateral investment treaties with other Governments. Malawi is also a member of the Multilateral Investment Guarantee Agency (MIGA), and is an eligible country under a number of other investment insurance programmes.Access to international arbitration
18.The Government acknowledges that investors must have an acceptable forum to resolve disputes that cannot be settled amicably. Parties to disputes may agree to pursue arbitration and to choose an appropriate forum, including international arbitration. The Government is a member of the International Centre for the Settlement of Investment Disputes (ICSID).Supplement
Investors Guide
Malawi welcomes private investors
The Government of Malawi encourages local and foreign investment in any sector of the economy, with no restrictions on ownership.This Guide presents information or the incentives and other advantages available to investors. Malawi offers an attractive investment climate, featuring:*A stable political and economic environment*Competitive investment incentives*Minimal requirements for company incorporation*Low cost, productive labour force*Modem telecommunications*Daily international flight connexions*Industrial estates and prospective export processing zones*Preferential access to regional and international marketsOne-stop assistance to investors
The Malawi Investment Promotion Agency (MIPA) has been established to provide free assistance to investors. It is directed by a high-level board consisting of private sector, parastatal and Government representatives.MIPA assists foreign and local investors by:*Providing courtesy services to visiting investors*Supplying information about Malawi*Identifying joint venture partners, when requested*Making introductions to the financial community and providers of professional and business services*Facilitating all aspects of the investment process, including relations with Government agenciesMIPA is located at—(1)____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Lilongwe(2)_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________BlantyreInvestment incentives
A General incentives
Malawi has a competitive corporate tax rate of 35 per cent and low import duties. In addition, Malawi offers an array of incentives, which often give new businesses an effective tax holiday for the first several years of operation. These include:* Generous tax allowances:* 40 per cent investment allowance on qualifying expenditures for new buildings and machinery* an additional 15 per cent allowance for investments in designated areas of the country* up to 20 per cent investment allowance on qualifying expenditures for used buildings and machinery* an additional 50 per cent allowance for qualifying training costs *allowance for manufacturing companies to deduct all operating expenses incurred up to 18 months prior to the start of operation *indefinite loss carry forward to enable companies to take full advantage of their tax allowances* greements for the avoidance of double taxation (see Appendix A)* agreements for reduction of withholding taxes on remittances and payments (see Appendix B)* deferred duties on machinery and equipment for up to 2 years *Full rebate of duties on heavy commercial vehiclesB. Additional incentives for export
To encourage exports, Malawi offers special incentives—* xport Processing Zones:* corporate tax rate of 15 per cent* no withholding tax on devidends* no duty on capital equipment and raw materials* no excise taxes on purchases of raw materials and packaging materials made in Malawi* no surtaxes (value added tax)* transport tax allowance in the amount of 25 per cent international transport costs* For all other exporters, including manufacturing in bond:* export tax allowance in the amount of 12 per cent of export revenues for non-traditional exports (i. e. other than tobacco, tea, sugar and coffee)* transport tax allowance in the amount of 25 per cent of international transport costs, excluding traditional exports* no duties on imports of capital equipment used mainly in the manufacture of exports for those manufacturing in bond* no surtaxes (value added tax)* no excise taxes on purchases of raw materials and packaging materials made in Malawi for those manufacturing in bond *timely refund of all duties (duty drawback) on imports of raw materials and packaging materials used in the production of exports* no duties on raw materials and packaging materials for those manufacturing in bondInformation on eligibility for export processing zones and manufacturing in bond is available from MIPA.Liberal trade and foreign exchange remittances
Investors in Malawi have free access to foreign exchange, both for paying for imports and transferring financial payments abroad. This free access include the following:*No licence requirement to import goods into Malawi*Full remittance of:*dividends*investment capital on repatriation*interest and principal payments for approved international loans *approved fees for management, licences, royalties and similar obligationsLegal framework
Malawi maintains a legal system based on English common law. Its Constitution protects investment, irrespective of ownership. Malawi is also a signatory to international treaties for the protection of foreign investment and the settlement of investment disputes including:*The Convention Establishing the Multilateral Investment Guarantee Agency (MIGA), 1986*Bilateral Investment Guarantee and Protection Agreements*The Convention establishing the International Centre for the Settlement of Investment Disputes between States and Nationals of Other States, (ICSIDS), 1965Local and expatriate labour
A. Local Labour
*Malawi has a hard-working skilled labour force*Average wages are low by regional and international standards*Malawi has had no history of industrial or labour boycotts*Free vocational training for company employees at national training centresB. Expatriate Labour
*Work permits are routinely granted where foreign expertise is needed*Two-thirds of after tax salary is remittableAvailability of land
*Land is readily available to investors in Malawi*Developed industrial estates will offer factory shells with necessary infrastructure close to labour pool and transport links*Serviced land for all uses may be leased from the Government and private leaseholders. Additionally, freeholds and leaseholds exist and may be purchased or leased from the private owners*Government approval for any transfer of land can be obtained within 90 days of an applicationAccess to capital
A. Local Financing Facilities
Both local and foreign investors have unrestricted access to local financing facilities. The financial system has been liberalized and special features include:*sound commercial banks and finance houses which adhere to international standards*no direct Government controls on credit*market based interest ratesB. Securities Markets
The Government encourages the development of securities markets.Under the new enabling legislation, the Capital Market Development Act, there are:*no restrictions on issues of securities to the public*no restrictions on private placement of securities to Malawi residents. Transfer of securities to non-residents should be registered with the Reserve Bank of MalawiEase of investment process
The investment process in Malawi is simple. All new companies need to be registered with the Registrar of Companies, and the process takes no more than 15 days.Manufacturing does not require a licence, except for a small number of industries (see Appendix C) which raise concerns of health and safety. However, trading activities are licensed.For data collection purposes, foreign investment capital needs to be registered with the Reserve Bank of Malawi. The terms and conditions of international loans, management contracts, licensing and royalty arrangements and similar technology transfers require Reserve Bank of Malawi approval. These approvals are automatically granted within internationally prevailing standards.Appendix A
Agreements for the avoidance of double taxation
Malawi has entered into Agreements for the Avoidance of Double Taxation with the following countries:DenmarkFranceKenyaNetherlandsNorwaySouth AfricaSwedenSwitzerland, andUnited KingdomAppendix B
Agreements for reduction of withholding taxes
Malawi has entered into Agreements for the Reduction of Withholding Taxes with the following countries which have resulted in the following tax rate reductions—| Treaty country recipient | Balance of earnings% | Dividends% | Interest% | Royalty% |
|---|
| Denmark | Nil | 15 | 15 | 15 |
| France | Nil | 15 | 15 | 15 |
| Kenya | Nil | 15 | 15 | 15 |
| Netherlands | Nil | 15 | 15 | 15 |
| Norway | Nil | 15 | 15 | 15 |
| South Africa | Nil | 15 | 15 | 15 |
| Switzerland | Nil | 15 | 15 | 15 |
| United Kingdom | Nil | Nil | Nil | Nil |
Appendix C
Industries requiring an industrial licence
(1)Firearms, ammunition and chemical and biological weapons;(3)Manufacturing involving hazardous waste treatment or disposal; and(4)Manufacturing involving radioactive material.