Malawi eyes China for tobacco earnings growth

Malawi is deepening trade and investment ties with China as part of a larger strategy to diversify its agriculture-dominated economy and increase its bargaining power in the international tobacco market, the country’s trade minister said late on Thursday.

Henry Mussa, Malawi’s Minister of Industry and Trade, said the country had last week signed an agreement with China that would allow its exports to the Asian economic giant to enjoy preferential tariffs. In return, it hopes to attract Chinese companies to come to Malawi to help it develop industries to process its crops.

“In tobacco, we would like the Chinese to come and manufacture cigarettes. In cotton, textiles manufacturing,” Mussa said at a Malawi investment forum in London organised by the Commonwealth Business Council.

Tobacco accounts for about 15% of the economy of Malawi, one of the world’s poorest nations, and about 60% of its foreign-currency earnings.

The country is one of the world’s top 10 producers of tobacco, with peasant farmers in Malawi growing it.

In March, Malawi suspended a three-day-old tobacco auction after farmers withdrew their crop in protest against a drop in prices.
Sales were resumed a few days later after government intervention to broker a settlement between market participants.

The main buyers of Malawi’s tobacco are United States firms such as Philip Morris and Universal.

However, China is the largest producer of tobacco and according to some estimates, accounts for nearly a third of the world’s total consumption of cigarettes.

“Tobacco will still be grown and sold in the foreseeable future but as a country we are diversifying into cotton, sugar, coffee, soya bean, ground-nuts,” Mussa said.

He said the government would like to see cotton’s share in total exports eventually rise to 30% from its current 7%.

Malawi established ties with mainland China in December after ending 41 years of relations with Taiwan, which Beijing views as a renegade province.

The government has forecast 8% growth this year, slightly higher than the International Monetary Fund’s (IMF) forecast of 7,7% economic expansion. - Reuters

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