Identifier
Created
Classification
Origin
06LILONGWE324
2006-04-06 06:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lilongwe
Cable title:
BINGU PROMISES MORE ECONOMIC INTERVENTION AS
how-toVZCZCXRO3916 RR RUEHDU RUEHJO RUEHMR DE RUEHLG #0324/01 0960624 ZNR UUUUU ZZH R 060624Z APR 06 FM AMEMBASSY LILONGWE TO RUEHLO/AMEMBASSY LONDON 0201 RUEHFR/AMEMBASSY PARIS 0093 RUEHC/SECSTATE WASHDC 2619 INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY RUEAIIA/CIA WASHDC RUEHLMC/MCC WASHDC
UNCLAS SECTION 01 OF 02 LILONGWE 000324
SIPDIS
SENSITIVE
SIPDIS
STATE FOR AF/S GABRIELLE MALLORY
STATE FOR INR/AA
E.O. 12958: N/A
TAGS: PGOV KDEM ECON EFIN EAGR MI
SUBJECT: BINGU PROMISES MORE ECONOMIC INTERVENTION AS
PARLIAMENT OPENS
LILONGWE 00000324 001.2 OF 002
UNCLAS SECTION 01 OF 02 LILONGWE 000324
SIPDIS
SENSITIVE
SIPDIS
STATE FOR AF/S GABRIELLE MALLORY
STATE FOR INR/AA
E.O. 12958: N/A
TAGS: PGOV KDEM ECON EFIN EAGR MI
SUBJECT: BINGU PROMISES MORE ECONOMIC INTERVENTION AS
PARLIAMENT OPENS
LILONGWE 00000324 001.2 OF 002
1. (U) Summary: President Bingu wa Mutharika opened the 39th
session of Parliament on April 4, marking the event by
promising to "pre-announce" prices for agricultural goods
later this year. The President also reiterated his intention
to continue fertilizer and seed subsidies and to launch
several new big-government economic plans. The three-week
sitting of Parliament begins with government for the first
time having the largest plurality (76 out of 193) of seats in
Parliament. While most MPs assume this will enable
government to pass a number of outstanding bills (including
the Anti-Money Laundering Bill),the two opposition parties
can still muster enough strength to block government on key
votes. End summary.
More Government Intervention
--------------
2. (SBU) Fresh from setting minimum prices for tobacco last
week--a move that could still disrupt the market and the flow
of foreign currency for Malawi--Mutharika opened the sitting
by announcing that government will pre-announce the prices on
certain crops before next year's growing season. Government
has not yet provided details on the program; it may be that
it intends only to provide production and pricing signals to
the market (that is, crop estimates and forecasts of the
price implications for those estimates). Many observers,
though, believe that Mutharika is about to roll out price
controls for all food commodities--a move he has hinted at
when talking about maize. His determination to set minimum
tobacco prices indicates that this is a likely direction for
future government intervention.
3. (SBU) Mutharika made a point of taking credit for a coming
"bumper crop"--thanks to his massive importation and subsidy
of fertilizer--and for "successfully" keeping the price of
ADMARC maize at MK850 ($6.34) per 50 kg bag. (In fact, while
the fertilizer subsidy does deserve some credit for a good
harvest, above-average rainfall has had a bigger influence.
The subsidized maize prices, on the other hand, slowed
private imports and are likely the cause for this year,s
record-high maize prices and widespread shortages on the
commercial market.) Mutharika also promised more
big-government economic solutions to come: government
establishment of "rural factories," large- and small-scale
irrigation projects, revitalization of statutory corporations
(with no mention of privatization),construction of the
Shire-Zambezi waterway (a presidential pet project of unknown
economic viability),continuation of an emergency
public-works program, a new development bank, and a new
science and technology university in Lilongwe.
Bingu Gaining Ground In The House
--------------
4. (U) The President's Democratic Progressive Party (DPP)
currently has 78 parliamentarians working with them, almost
double the number they had when Parliament last met in
October 2005. The DPP has gained seats by a combination of
poaching MPs from other parties, convincing independents and
small parties to join them, and winning all six seats in
December's by-election. The DPP has now eclipsed the
opposition Malawi Congress Party (57 seats) to become the
largest party in Parliament, though they are still short of
the 96 seats needed for an outright majority.
Comment: House Back to Work, but Concerns about Policy
-------------- --------------
5. (SBU) On a purely political level, the new strength of the
DPP makes it more likely that Parliament will actually be
able to accomplish its modest goals for the sitting, which
center on passing bills that have been neglected for several
politics-choked sessions. The DPP should be able to gain a
working majority on most issues, though it still might
struggle to do so on more contentious issues.
6. (SBU) Mutharika,s emphasis on state-driven economic
solutions, however, is increasingly worrying. During this
speech, there was scant mention of improving the business
climate for private investment, but plenty of new programs
for the state. At this point, it is difficult to discern
real policy direction from the usual presidential rhetoric on
these occasions (which leans toward taking credit for rain
and sunshine). On top of that, the GOM,s ability to execute
LILONGWE 00000324 002.2 OF 002
on ambitious policy is limited at best. In any case, it
looks as if Mutharika is swinging in a populist direction,
which will do away with the debate surrounding unpopular
economic reform.
GILMOUR
SIPDIS
SENSITIVE
SIPDIS
STATE FOR AF/S GABRIELLE MALLORY
STATE FOR INR/AA
E.O. 12958: N/A
TAGS: PGOV KDEM ECON EFIN EAGR MI
SUBJECT: BINGU PROMISES MORE ECONOMIC INTERVENTION AS
PARLIAMENT OPENS
LILONGWE 00000324 001.2 OF 002
1. (U) Summary: President Bingu wa Mutharika opened the 39th
session of Parliament on April 4, marking the event by
promising to "pre-announce" prices for agricultural goods
later this year. The President also reiterated his intention
to continue fertilizer and seed subsidies and to launch
several new big-government economic plans. The three-week
sitting of Parliament begins with government for the first
time having the largest plurality (76 out of 193) of seats in
Parliament. While most MPs assume this will enable
government to pass a number of outstanding bills (including
the Anti-Money Laundering Bill),the two opposition parties
can still muster enough strength to block government on key
votes. End summary.
More Government Intervention
--------------
2. (SBU) Fresh from setting minimum prices for tobacco last
week--a move that could still disrupt the market and the flow
of foreign currency for Malawi--Mutharika opened the sitting
by announcing that government will pre-announce the prices on
certain crops before next year's growing season. Government
has not yet provided details on the program; it may be that
it intends only to provide production and pricing signals to
the market (that is, crop estimates and forecasts of the
price implications for those estimates). Many observers,
though, believe that Mutharika is about to roll out price
controls for all food commodities--a move he has hinted at
when talking about maize. His determination to set minimum
tobacco prices indicates that this is a likely direction for
future government intervention.
3. (SBU) Mutharika made a point of taking credit for a coming
"bumper crop"--thanks to his massive importation and subsidy
of fertilizer--and for "successfully" keeping the price of
ADMARC maize at MK850 ($6.34) per 50 kg bag. (In fact, while
the fertilizer subsidy does deserve some credit for a good
harvest, above-average rainfall has had a bigger influence.
The subsidized maize prices, on the other hand, slowed
private imports and are likely the cause for this year,s
record-high maize prices and widespread shortages on the
commercial market.) Mutharika also promised more
big-government economic solutions to come: government
establishment of "rural factories," large- and small-scale
irrigation projects, revitalization of statutory corporations
(with no mention of privatization),construction of the
Shire-Zambezi waterway (a presidential pet project of unknown
economic viability),continuation of an emergency
public-works program, a new development bank, and a new
science and technology university in Lilongwe.
Bingu Gaining Ground In The House
--------------
4. (U) The President's Democratic Progressive Party (DPP)
currently has 78 parliamentarians working with them, almost
double the number they had when Parliament last met in
October 2005. The DPP has gained seats by a combination of
poaching MPs from other parties, convincing independents and
small parties to join them, and winning all six seats in
December's by-election. The DPP has now eclipsed the
opposition Malawi Congress Party (57 seats) to become the
largest party in Parliament, though they are still short of
the 96 seats needed for an outright majority.
Comment: House Back to Work, but Concerns about Policy
-------------- --------------
5. (SBU) On a purely political level, the new strength of the
DPP makes it more likely that Parliament will actually be
able to accomplish its modest goals for the sitting, which
center on passing bills that have been neglected for several
politics-choked sessions. The DPP should be able to gain a
working majority on most issues, though it still might
struggle to do so on more contentious issues.
6. (SBU) Mutharika,s emphasis on state-driven economic
solutions, however, is increasingly worrying. During this
speech, there was scant mention of improving the business
climate for private investment, but plenty of new programs
for the state. At this point, it is difficult to discern
real policy direction from the usual presidential rhetoric on
these occasions (which leans toward taking credit for rain
and sunshine). On top of that, the GOM,s ability to execute
LILONGWE 00000324 002.2 OF 002
on ambitious policy is limited at best. In any case, it
looks as if Mutharika is swinging in a populist direction,
which will do away with the debate surrounding unpopular
economic reform.
GILMOUR