There was no clear plan for dealing with this fundamental problem. Neither the private sector nor donors had much incentive to invest in Malawi; other countries in the region were much more attractive. The prospect of failed harvests and more hunger remained very real.

Today, the situation is very different. Malawi reached the Highly Indebted Poor Country (HIPC) completion point in late 2006. The cost of servicing international debt has dropped dramatically. Prudent fiscal management and fulfilment of IMF prescriptions have resulted in a reduction in domestic debt, inflation rates coming down to 7.5 percent in December 2007 and the cost of borrowing has dropped to 15 percent from 25 percent four years ago. Malawi is now in its third successive year of 7 percent plus economic growth, reflecting strong financial management and increased economic activity as a result of three good harvests since 2006.

Multilateral and bilateral donors have greater confidence that aid resources and concessional loans will be used to good effect, and private investment is increasing, albeit from a low base. Corruption remains a problem but there has been a change of atmosphere with the President's commitment to a zero tolerance policy. To address the problem of hunger, the Government put in place its agricultural input subsidy programme in 2005 and has persuaded all development parties to rally around it. Good rains, Government leadership and partners' support have been a great combination.

Moving forward

Malawi faces many challenges in moving forward. The economy remains precariously dependent upon agriculture and rainfall patterns. There has been a visible deterioration in the environment in the four years I have been here. The energy sector is in crisis and far more investment is needed in infrastructure, including communication, transport, electricity and housing, urban and rural. Climate change is adding an element of worrisome unpredictability. What is clear is that climate change will seriously affect the economy, food production, health and the natural environment.

Maternal mortality rates may have improved but they remain far too high. Infant mortality rates have improved but there are still too many children suffering. The scale up in ARV provision has been spectacular - from a few thousand in 2004 to over 150,000 today - but failure to change behaviours and practices that result in the spread of AIDS does not bode well for the battle against HIV/AIDS, which has already created a generation of orphans.

Food security and winning the battle against hunger and chronic malnutrition are rightly a top national priority. The agricultural input subsidy scheme plus good rains have turned the situation in Malawi around since 2005. But the rising costs of fuel and fertilizer mean that the cost of the scheme, which already represents a huge share of the national budget, will rise.

This needs to be addressed at several levels, including by refining the scheme to ensure its effectiveness as a vehicle for strengthening social protection, and by improving the logistical aspects. Timely procurement and distribution of inputs is fundamental to its efficiency and success.

In my view, the input subsidy scheme can contribute to broader economic growth efforts, but economic growth depends upon the pursuit of a much wider agenda, whether in agriculture or beyond. Great progress has been made but there remains scope for strengthening the regulatory environment for entrepreneurs, investors and the private sector; tax incentives; expanding access to credit and promoting investment opportunities.

Major challenges remain

In addition to these specific challenges, I would identify two over-arching challenges. The first is a multi-dimensional capacity crisis in the public service, whether at the centre or in the districts. The number of talented Malawian graduates and post graduate students has increased, especially relative to 20 or 30 years ago. But public service provision and implementation capacity is weak, and not yet up to the growing challenges that Malawi faces as the population multiplies and demands upon infrastructure and the public sector grow.

There are many reasons for this capacity deficit. They include the 'brain drain' -- notably but not only in the health sector; losses as a result of HIV/AIDS, malaria and other diseases; insufficient resources to pay people what they deserve, though wages in the public sector have steadily increased in the last four years; and a decline in institutional capacity. That means that even where there are clever and motivated people, the management and administrative systems are not in place to exploit their potential. Weak human resource, project and financial management capacity means that resources are not being put to optimum use.

Personally I am reluctant to describe what Malawi faces as an 'absorption capacity' problem. I worry that this will be used as grounds for not increasing levels of development assistance. There are many ways in which additional resources can and must be 'absorbed' to improve the quality of life, which is desperately low for far too many people. But in many priority sectors -- including HIV/AIDS, health more broadly, and agriculture -- there are too many examples of grants and loans being disbursed far too slowly.

Addressing practical implementation capacities in the public service remains a major challenge; failure to do so is already impeding the translation of the increase in income that has resulted from steady economic growth into practical benefits for the bulk of the population.

The other over-arching challenge is essentially political. Malawi has a minority government. Political differences between the ruling party and the other two big parties could bring the country to a standstill, and have already resulted in the delay of critical legislation. Mercifully these political differences have not yet resulted in serious public disorder, but they continue to put enormous strain on Malawi's still very young multi-party democracy.

Disputes over things such as key public appointments and Section 65 have been played out in the already over-stretched legal system, and the courts have become a theatre for resolving issues which should be resolved politically. (Section 65 of Malawi's constitution forbids members of parliament from crossing the floor to join another party without facing a by-election for their seat.)

Deep distrust between the main players as to respective motives regarding Section 65 have repeatedly jeopardized passage of the budget, damaged Malawi's usually high standards of civility and distracted precious time and attention away from addressing pressing development and social needs. In this atmosphere, elections offer a way forward. It's essential that the upcoming presidential and parliamentary elections are well prepared and conducted, and are recognized as free and fair both by the population and by the international community. And preparations for this need to begin today, not just when the elections take place in May 2009. The good news is that at the moment all sides profess -- and I sense genuinely believe -- that free and fair elections are in their interest.

My only disappointment is to be leaving when there is so much going on, in what will be a fascinating time in Malawi's history. The United Nations Development Programme is very engaged, along with the broader UN family, in a number of strategic areas, including climate change, capacity development for public sector reform, supporting the national monitoring and evaluation road map, broadening the financial sector, growing sustainable business, supporting a sector based approach to access to justice, and strengthening Malawi Electoral Commission's capacity to conduct free and fair elections. In each case, the UN is working to support national leadership and coordination, providing policy and technical support, assisting with resource mobilization and the achievement of measurable results.

I feel privileged and proud to have worked with a great UN team and part of the process over the last four years in which we have reaffirmed the UN system's relevance to Malawi as a partner in a rapidly changing development environment.

The UN family has successfully reorganized itself to ensure that our skills and resources are used to help Malawi achieve a defined number of development outcomes where we can serve as lead partner to Government and civil society. Finally, from a personal point of view, this has been a deeply enriching experience. I will carry a part of Malawi with me, whether memories of Nyika, Mulanje, the Lake or the northern forests, and, more importantly, her people, many of whom have now become lifelong friends.
Michael Keating has served as the Malawi UN Resident Coordinator/UNDP Resident Representative since August 2004. At the end of his tenure, he presents a personal perspective on how Malawi has changed and the social and economic challenges it faces towards achieving its national development priorities.(END/2008)