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CONSULTANT TO REVIEW THE MALAWI INDUSTRIAL REBATE SCHEME

Background

There is no nation in the world that has graduated from poverty and attained rapid socioeconomic growth and development without a robust industrialization of its economy. Industrialization is the process whereby a nation experiences social and economic transformation through the expansion of its capacity to produce secondary goods as well as services. Industrialization is the key to economic transformation, employment generation and wealth creation of an economy. The industrial sector is in general composed of mainly manufacturing, mining and construction industries. However, the manufacturing sector is the component of industry that presents greater opportunities for sustainable economic growth, employment creation and poverty reduction in any nation.

In Malawi, the industrial sector is poorly developed and accounts for a negligible share of the country's Gross Domestic Product (GDP). Since independence, the sector has not been able to attract substantial investment to expand the country's productive capacity, boost economic growth and achieve sustainable economic transformation, despite the implementation of several initiatives aimed at promoting industrial growth in the country. The sector is characterized by low technological development with limited inter-industry linkages and relies heavily on imported inputs. In addition, it is heavily dependent on agriculture as a source of demand for its products as well as generator of foreign exchange for the importation of raw materials, intermediate and capital goods. Agro-processing constitute the major industrial activity in the country and accounts for much of Malawi's industrial growth recently.

The Government of Malawi, in its commitment to reducing poverty and attaining sustainable economic development for its people, has developed its Second Growth and Development Strategy (MGDS II), which runs from 2011 to 2016. The MGDS II is the country's medium term strategy, which is designed to ensure the attainment of the long term aspirations of Malawi as outlined in Vision 2020. The objective of MGDS II is to continue to reduce poverty through sustainable economic growth and infrastructure development in the country. The MGDS II recognized the role of the private sector in promoting rapid economic growth and wealth creation. It stipulates that increased industrial activities are critical for generating employment opportunities, expanding the manufacturing base, enhancing value addition and diversifying exports.

In order to complement the MGDS II, the Government of Malawi has also developed the National Export Strategy (NES), which was launched in 2012 as a key strategy to achieve the goals of the MGDS II. The NES focuses on how Malawi can build its productive base to generate sufficient exports to match the upward pressure on Malawi's imports. This strategy hinges on three prioritized export-oriented clusters for diversification including the Oil Seed prioritized Product cluster, the Sugar Cane prioritized Product cluster and the Manufactures prioritized cluster. The Manufactures cluster is one of the priority clusters of the NES in which Malawi has high potential of competitiveness and can allow for enough value-addition that can account for roughly 17% of imports in the medium to long-term.

Meanwhile, in an effort to boost the country's industrialization process and to assist the local manufacturing industries to be competitive and increase value-addition activities for export, the Government of Malawi introduced an industrial rebate scheme, which is being implemented in the country through the Malawi Revenue Authority (MRA). The rebate scheme was introduced to support domestic production and in the process, promote the export of manufactured goods. The scheme allows the manufacturing industries that satisfy certain conditions to import raw materials into the country on duty free. MRA was mandated by an Act Parliament as the sole authority responsible for the administration of the industrial Rebate scheme.

In 2010, the scheme underwent a review in which it was made a requirement that for a manufacturing industry or sector to qualify for rebate, it must meet 20 percent value-addition to raw materials. To date, there are 37 active industrial sectors out of 61 that are benefiting from the scheme. The process of enlisting into the scheme is through the submission of an application to the Commissioner General, who has established an advisory Committee that screens all applications as against the established requirements for enrollment into the scheme. The scheme exempts Import Duty and Excise Taxes on raw materials that can be used mainly for manufacturing purposes. Various types of industries are approved for rebate, and specified materials used by those industries may be imported or delivered duty free. The scheme encourages value-addition and boost the country's manufacturing capabilities with the view to creating employment and generating foreign exchange.

Since the introduction of the rebate scheme, the manufacturing industries that were able to meet the specific requirements of the scheme are benefiting from it, thus, increasing their capacity to produce not only for the domestic market but also for export to neighboring countries. However, in recent years, the rebate scheme has received criticisms from the manufacturing sector on its operational modalities, transparency and fairness on awarding rebate to the manufacturing industries. Many manufacturing industries, including the SMEs that are engaged in the manufacturing business, have also expressed grave concern that they are unable to meet the conditions required to benefit from the scheme and as a result, the purpose for which the scheme was introduced is not been realized. It is in this regard that the Malawi rebate scheme requires fundamental review and direction in order to come up with a well-structured, effective and efficient rebate that can allow beneficiary industries to grow and graduate from it within a reasonable time. The review should also reflect the context of the SADC and COMESA Customs Union frameworks.

Duties and Responsibilities

The purpose of the Consultancy is to review Malawi's current Industrial Rebate Scheme to guide for fair competition and identify the critical factors that render the scheme ineffective. The review is also expected to propose recommendations for the improvement of the scheme in order to benefit the manufacturing industries in the country. The Consultant will be based at the Malawi Ministry of Industry and Trade (MoIT) and reports directly to the Tax Task Force, established under the Manufactures Technical Working Group (TWG) within the context of the Trade, Industry and PSD Sector Wide Approach (TIP SWAp), and chaired by the Ministry of Finance (MoF).

The Consultant will work under the leadership of the Tax Task Force chaired by the Ministry of Finance (MoF) and with other key stakeholders including the Malawi Revenue Authority (MRA), and the Private Sector for the duration of the consultancy.

The study is expected to cover the following:
  • To review the current industrial rebate scheme offered by the Government of Malawi;
  • Identify and highlight the benefits and shortcomings/gaps of the current Malawi's industrial rebate scheme;
  • Highlight the challenges faced by the manufacturing sector/industries in accessing the rebate scheme;
  • Provide a comparative analysis of the industrial rebate scheme of Malawi with minimum two similar countries in Africa that are implementing best practices Industrial Rebate Schemes;
  • Examine regional trade and industrial schemes, within the context of COMESA and SADC, focusing on industrial rebates and provide direction on harmonization efforts to be undertaken by Malawi;
  • Review the eligibility criteria for prioritized industries in alignment with the Manufactures Strategy and the National Industrial Policy;
  • Review the regulatory framework of the Industrial Rebate Scheme and implementation mechanism;
  • Assess and provide recommendations on institutional capacity building requirements for the implementation of the industrial rebate scheme;
  • Recommend an improved and more efficient rebate scheme including an action plan for the implementation of the scheme.
  • Recommend on systems and equipment that could be employed to screen investments and successfully manage the industrial rebates
  • Determine quantifiable benefits of adopting a revised industrial rebate scheme.
Deliverables:
  • The consultant will be required to deliver the following:
  • Inception report highlighting the approach to the assignment and critical areas of focus.
  • Draft a Report to be presented at a Validation Workshop that will be organized by the Tax Task Team with funding from UNDP.
A comprehensive final report that includes, amongst others:
  • Proposal of a more efficient and competitive industrial rebate scheme suitable for Malawi in its design and delivery mechanism.
    Highlights of the shortcomings/gaps of the scheme. 
  • Eligibility criteria for prioritized industrial sectors and company brackets for Industrial Rebates;
  • Challenges faced by the manufacturing sector/industries in accessing the industrial rebates and possible solutions;
  • Policy recommendations for a more efficient and transparent scheme;
  • Institutional Capacity Building requirements to effectively deliver the scheme
  • An Action Plan for the implementation of the recommended rebate scheme.
  • Implementation arrangements
    The consultant is expected to be fully self-sufficient in terms of office equipment and supplies, communication, accommodation and transport. The consultant will report and work under the direct supervision of the Tax Task Force chaired by the Ministry of Finance
  • Timeframe
  • The assignment is expected to take 30 man days inclusive of field work, report writing and validation Workshop. The assignment will be conducted over a maximum period of four months.
 Methodology
  • Assignment Framework:
  • Develop a Framework for the assignment to be agreed upon with the Ministry of Industry and Trade and UNDP prior to undertaking the specific tasks required by the assignment and which will form the basis of an inception report;
 Desk Review:
  • Identify, assemble and select all the available key reports and reference documents relevant for the assignment;
  • Utilize the Customs and Excise Act, Taxation Act, and the VAT Act, the Manufactures Strategy and the Industrial Policy as basis for this assignment for purposes of extracting all relevant issues pertaining to industrial rebate scheme;
 Consultations:
  • Conduct individual and group consultations that will involve one-on-one interviews and group discussions with relevant Government Ministries and Departments, Technical Agencies, Technical Working Groups under the TIP SWAp (Trade, Industry and Private Sector Development Sector Wide Approach), Development partners and the Private Sector that are directly or indirectly involved with industrialization in the country;
 Facilitate a validation workshop where the draft Industrial Rebate Report will be presented to a wide scope of stakeholders from Government and Private Sector.

Competencies

Corporate Competencies:
  • Promotes the vision, mission and strategic goals of UNDP;
  • Demonstrates integrity by modelling the UN’s values and ethical standards;
  • Displays cultural, gender, religion, race, nationality, and age sensitivity and adaptability.
Functional Competencies:

Technical knowledge:
  • Demonstrates a thorough understanding of the issues and challenges related to industrialization;
  • Exhibits a good knowledge of institutional development and capacity development issues.
 Development and Operational Effectiveness:
  • Ability to lead and contribute to strategic planning, change processes, results-based management;
  • Ability to apply development theory to the specific country context to identify creative, practical approaches to overcome challenging situations;
  • 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;
  • Ability to apply judgment in the context of assignments given, plan own work and manage conflicting priorities and shows pride in work and in achievements; demonstrates professional competence and mastery of subject matter; is conscientious and efficient in meeting commitments, observing deadlines and achieving results;
  • Ability to build and sustain effective partnerships main constituents, advocate effectively, communicate sensitively across different constituencies.
Knowledge and Information Management and Learning:
  • Facilitates knowledge and information sharing and learning culture.
  • Actively works towards continuing personal learning and development in one or more Practice Areas, acts on learning plan and applies newly acquired skills.
Management and Leadership:
  • Builds strong relationships with stakeholders and clients, focuses on impact and results for clients, and respond positively to feedback.
  • Ability to establish effective working relations in a multicultural team environment.
Excellent interpersonal skills.
  • Consistently approaches work with energy and a positive, constructive attitude.
  • Demonstrates strong oral and written communication skills.
  • Demonstrates capacity to communicate effectively; resource management; capacity to plan and organize programmes effectively.
  • Demonstrates resourcefulness, initiative and mature judgment.
  • Demonstrates openness to change and ability to manage complexities.
  • Patience to work under pressure and maintains positive outlook and humour.

Required Skills and Experience

    Education:
    • The successful candidate is expected to possess a minimum of Master Degree in Economics, Public Policy with a focus on Industrial Development, Development Studies, Public Administration related to Industrialization. Candidates with a PhD in any of the above areas will have an added advantage.
    Experience:
    • Minimum of 8 years professional experience;
    • A proven track record of conducting similar assignments on industrialization in the Southern Africa region, preferably relating to policy research and implementation;
    • Thorough knowledge of policy/strategy issues relating to trade, private sector-led growth, with particular emphasis on manufacturing industries development, and ability to undertake institutional and economic analysis both quantitative and qualitative;
    • Knowledge and understanding of theories, concepts and approaches relevant to development economics, with a focus on African industrialization.
    Language: 
    • Fluency in English.

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