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Challenges to Soya Export Promotion in Malawi: an Institutional Analysis of the Soya Export Sector Noora-Lisa Aberman, IFPRI- Lilongwe Brent Edelman, IFPRI/Consultant

Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

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Malawi relies heavily on tobacco for export earnings. One strategy for promoting a more stable and vibrant economy is to diversify away from tobacco and broaden its export base to high potential commodities like soya. However, we hypothesize that there are institutional barriers impeding consistent growth in soya exports and seek to identify the critical ones. This study undertakes an institutional analysis of the soya export sector. Using a qualitative research approach based on semi-structured interviews, we examine: a) the policy environment, b) the exporters and the regulatory actors, c) the framework of legal rules and requirements for exporting soya, and d) the ways in which the policy environment and regulatory framework influence actor behavior. We find a highly centralized policy and governance environment that, when faced with a decision, is more likely to add layers of regulation than rely on market forces, in spite of low enforcement capacity. Regarding actors’ behavioral responses to the regulatory framework and the policy environment, we find inconsistent application of rules and regulations, highlighted by time variations, perceived discretionary power, and lack of enforcement; these inconsistencies are driven by lack of capacity to implement the requirements effectively due to understaffing and infeasibility of enforcement.

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Page 1: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Challenges to Soya Export Promotion in Malawi: an Institutional Analysis of the Soya Export Sector

Noora-Lisa Aberman, IFPRI-LilongweBrent Edelman, IFPRI/Consultant

Page 2: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Study Rationale • Malawi relies heavily on tobacco (and a few other key

cash crops) for export revenues (tobacco 60%) (WB 2010), leaving the economy vulnerable to exogenous shocks• Soya is identified as high-potential crop in NES• Has potential to:• Improve incomes/decrease risk for small farmers (93% of

soya production)• Improve diets• Improve soil quality

• In spite of regional demand and increased production, exports are variable

Page 3: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman
Page 4: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Challenges to Promoting Soya Exports

• Trade literature typically focuses on tariff and non-tariff measures as impediments to exports• In the developing country context, there may be even

more limiting for the business environment, such as the implementation and enforcement of the formal rules and requirements• As such, this study takes an institutional approach,

examining the formal rules as well as HOW they are fulfilled.

Page 5: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Study OverviewInstitutions systems of established and prevalent social rules that structure interactions of economic actors (Hodgson 2006). This study takes an institutional approach, examining:

1. The broad policy and governance environment,2. The actors (exporters and the regulatory actors) and their

characteristics, and 3. The framework of legal rules and requirements,4. The way in which the first 3 influence the behavior of

actors*based on analytical framework from Kirsten, Dorward, Poulton, and Vink, 2009.

Page 6: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Study Overview, cont.• Qualitative methods better for assessing issues of

enforcement and implementation, etc. (Buchanan, Chai and Deakin 2013)• Applied the Net-Map interview method, which assesses

the actors involved in a given issue, their interactions, their power, and other relevant actor attributes. • Semi-structured interviews with exporters (9) and policy

stakeholders (govt, private, dev partners, 8). Results triangulated in structured interviews with regulatory body representatives. Interviews continued until saturation.

Page 7: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Study Overview, cont.• Collected actors’ narratives on formal requirements and

the policy environment in, and quantitative information on: • Costs and time requirements for completing formal export

requirements;

• Perceptions about the amount of discretion that regulatory actors take in the soya export process, quantified into a score of 1-5;

• Social network data reflecting policy actors involved in pressuring for—or blocking—reform of the formal export requirements.

Page 8: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

1. The broad policy and governance environment

Page 9: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Policy and Governance Environment• Made up of fundamental political and social ground

rules in which institutions are developed (Kirsten et al, 2009)

• Centralized, top-down government decision-making structure. • More likely to add layers of additional regulation than

rely on market forces, in spite of low enforcement capacity.

Page 10: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

2. The actors (exporters and the regulatory actors) and their characteristics

Page 11: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

ActorsKey actors and their characteristics play an important role in the institutional landscape.

•Few, large-scale firms engaging in export sector•Key regulatory actors: MoIT, MRA, Plant Protect Serv, Reserve Bank & MoAIWD. •Domestic consumption primarily industrial – poultry industry & soya processors

Page 12: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Policy Position LegendSupportive Opposed Conflicted Undecided

Actor Power and Policy Positions

Page 13: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

3. The framework of legal rules and requirements, and how they are implemented

Page 14: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Regulatory Framework for Soya Exports

Page 15: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Discretionary Power

Page 16: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

The Case of Soya Export Bans• Export bans have been periodically put in place at the

request of influential industrial soya consumers, to the detriment of farmers and exporters • These actors tend to bypass open fora (e.g., PPD

forum) and take concerns directly to ministerial/presidential level• Reform took place, but not through proper channels

(easily reversed) so exporters feel environment is still uncertain

Page 17: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

4. The way in which the institutional landscape shapes the behavior of actors

Page 18: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

Navigating the institutional landscape

• Tendency to add layers of regulation even in a context of institutional weakness indicated by inconsistency of implementation and lack of enforcement • Lack of clarity about how to comply with requirements

acts as barrier for new entrants to the sector and may create opportunities for rent seeking• Exporters cope with inconsistencies through

patronistic behavior – make use of personal connections to make process easier and more predictable

Page 19: Challenges to Soya Export Promotion: an Institutional Analysis of Trade Policy in Malawi by Noora-Lisa Aberman

ConclusionsInstitutional capacity is challenging to address! Better clarity/articulation of the rules will decrease need for patronage• Increase transparency and consistency of information about

process

Make regulatory environment more consistent• Get rid of requirements that are not enforced, or invest in

them if important • Make export license reform more permanent

Decrease need for back-door bargaining• Promote and legitimize institutions for PP collaboration