Unrecorded cross-border trade between Malawi and neighboring countries

Specifically, the study provides: (1) estimates of the magnitude of the unrecorded trade between Malawi and its neighbors, highlighting the most important commodities and categories of the commodities being traded, and the trade patterns; (2) an overall analysis of how informal cross-border traders overcame the major constraints facing formal cross-border traders; (3) a comparative analysis of the recorded and unrecorded trade volumes, highlighting the factors determining the disparity between the two sets of figures; (4) an overall assessment of the impact of ICBT on national food security; and (5) recommendations on the steps that have to be taken to enhance trade between Malawi and its neighbors. Total ICBT between Malawi and its neighbors amounted to $44 million. Sugar proved to be the most valuable commodity exported informally from Malawi; other key commodities were maize, fertilizer, and second-hand clothes. Except for trade with Mozambique, the value of informal trade surpassed the value of formal trade by about a third and probably more. The value of revenue foregone by the Malawi government as a result of ICBT was between $762,000 and $1.3 million in the case of agricultural commodities and $12 million in the case of non-agricultural commodities -- an extremely large figure for a small economy such as that of Malawi. On the positive side, income generated from ICBT was estimated at about 25% of the value of the trade, implying that border communities gained at least $11 million in goods and services. The employment and income generated by the trade also increased access to food by participants and their families, while also providing market opportunities for local producers. Major policy implications are to: (1) further deregulate the economy by reducing the barriers to formal trade; (2) harmonize the trade policy and deregulation processes regionally so that all countries are in tandem; (3) encourage cross-border trade in food commodities with food-deficit countries such as Malawi actively pursuing a regional food security strategy; and (4) rescind the criminalization of informal trade. Includes references.