IMPLEMENTING ENABLING LEGISLATION FOR SUSTAINABLE ECONOMIC GROWTH

IMPLEMENTING ENABLING LEGISLATION FOR SUSTAINABLE ECONOMIC GROWTH
PAPER PREPARED FORSOCAM SYMPOSIUM ON
SUSTAINING MALAWI’S ECONOMIC GROWTH: PROSPECTS AND CHALLENGES

Introduction

The assignment I have before me can be claimed to be a simple one:
describe how to implement an enabling legislation for sustainable economic growth!
But so many dangerous assumptions have been accommodated in the statement. Among them
that the enabling legislation is in place and that it is implementable.

It also assumes that there is economic growth that can be sustained …

What is sustainability? What is Growth? Should we look at it from the view of the 1377 Arabian economic thinker Ibn Khaldun? Or David Hume, Ricardo, or the ‘Japan model’? Perhaps the ‘US model’?

I am however very happy with the topic as it allows expression of MY views

Presentation Outline
Definitions
Demands / expectations of sustainable economic growth legislation
Legislation in Malawi
Implementing legislation
Enforcement of legislation
Flash lights for successful legislation implementation
Conclusion

Definitions

‘Legislation implementation' is the process by which the state takes a variety of measures to bring stakeholders into conformity with their obligations under the law.
These measures may include laws, administrative procedures and regulations.
There is no single approach to implementation.
Economic growth is the increase in value of the goods and services produced by an economy.
It is conventionally measured as the percent rate of increase in real gross domestic product.
"Economic growth" typically refers to growth of potential output, i.e. production at "full employment," which is caused by growth in aggregate demand or observed output.
Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced.
As a field of study, Economic growth is generally distinguished from Development economics.
The former is primarily the study of how rich countries can advance their economies.
The latter is the study of how poor countries can catch up with rich ones.
Sustainable Economic Growth
The Economic Times, 12 October 2006.
"It is sobering to note that inexorable growth is the characteristic of cancers and nuclear fission- processes that ultimately destroy their hosts."
World Commission on Environment and Development defines SEG as
‘Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’
in contrast with economic growth as GDP growth or a long term expansion of the supply-side of the economy.

Sustainable Economic Growth

Sustainable Economic Growth is a product of both process and content of legislation. It demands
accountability,
transparency,
certainty,
competitiveness,
continuous improvement,
efficiency,
innovation,
integration,
evidence/science-based decision making, and
shared responsibility.
Legislation for sustainable economic growth should facilitate these.
Let us see how implementation of legislation for sustainable economic growth can be done:
Accountability
Setting performance-based standards and indicators and implementing mechanisms for compliance, auditing and reporting on progress towards sustainable resource management. An effective enforcement regime is a key part of accountability.
Transparency
Establishing open and understandable decision-making processes including consulting with key interests prior to making decisions. Transparency also includes the public release of monitoring and compliance records, and tracking of sustainability indicators.
Certainty
Making timely and clear resource management decisions within a predictable and understandable regulatory framework.
Competitiveness
Ensuring that Malawi remains internationally competitive by removing barriers to investment and promoting fair and open trade.
Continuous improvement
Learning from the past and looking for new and improved approaches to management.
Efficiency
Maximizing the net benefits arising from the allocation, development and use of natural resources.
Innovation
Encouraging innovative approaches, technologies and skills to ensure the sustainability of natural resources.
Integration
Ensuring that resource management decisions integrate economic, environmental and social considerations for the benefit of present and future generations.
Evidence-based decision-making
Making justifiable decisions informed by science-based information and risk assessment.
Shared responsibility
Encouraging co-operation among different arms of the government, national and local governments; industry and civil society in developing and implementing finance management policies.
Implementation of legislation
Successful Implementation is measured by quality and quantity of goods and services produced in the country
Requires institutions:
Policy direction
Joint ownership
Enforcement
Authorisation
Inspection
Reporting
Targets, indicators
Largely implementation of such legislation looks at
Economic Management,
Financial Sector Regulation,
Tax Management,
Public Expenditure Management,
Public Service Establishment, and
Corporate Services.
The principle on the part of government is "Spend within the means" – so as the national budget to have a surplus; to ensure that the rate of change of public expenditure is equal to or less than the rate of change of revenue; to maintain a sustainable debt profile; and to sustain inflation rate at single digits.
Marcus Tullius Cicero, 63BC
"The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt."
Marcus Tullius Cicero
Circa 63BC
Legislation in Malawi
Malawi already has several pieces of legislation that will facilitate sustainable economic growth as espoused by the Malawi Growth and Development Strategy (MGDS).
Among them are
Public Finance Management Act (PFMA),
Public Audit Act,
Public Procurement Act;
Competition and Fair Trading Act,
Consumer Protection Act
Public Finance Management Act
The act stipulates everything
Responsibility for Financial Management
Economic, Fiscal and Financial Policy
Parliamentary Appropriation and Budget
Public Money and Consolidated Fund
Trust Moneys and Unclaimed Money
Borrowing, Loans and Guarantees
Statutory Bodies
Financial Reporting
Offences and Discipline
What is at stake is ENFORCEMENT.
Flash lights for successful legislation implementation
An enabling legislation must boost growth, create a wider and more effective economic area; create more and better jobs and modernise the social welfare model; foster a knowledge-based economy and society, including through education and training; and promote sustainable development and decoupling growth from environmental damage.
1. Boosting growth
Sound, stability-oriented macro-economic policies based on sustainable public finances provides the essential underpinning of Malawi’s economy, in particular in the light of demographic multiparty developments.
The process of fiscal consolidation needs to be continued in accordance with the Malawi Growth and Development Strategy.
A comprehensive set of legislation was adopted in 2003 namely Public Finance management Act (PFMA), Public Audit Act, Public Procurement Act.
An essential condition for boosting employment-creating growth is to create a climate in which business and industry generally, and entrepreneurship and innovation in particular, can flourish.
2. Fiscal Policy
The key fiscal policy objective is to have national budget surplus. This in the long term would reduce interest rates and Government’s demand for loans, and stimulate growth in the private sector.
The critical management of the revenue, expenditure and debt programme is crucial to the achievement of the fiscal targets.
3. Revenue
The Tax regime has to be reorganised so that the MRA is fully accountable for meeting tax revenue targets.
The ability to increase revenue will be impacted as Malawi deepens its obligations under the Economic Partnership Agreements (EPAs) and other various trade agreements (e.g. WTO) while trying to maintain a competitive tax regime.
4. Tax Policy
In order to enhance sustainability in the economic growth, there is need to constantly review the tax policy to achieve consistency with growth;
bring tax legislation in alignment with the objective of economic growth;
modernise the Tax Administration functions;
establish a link between revenue and expenditure policies; and
increase the drive towards voluntary compliance. This will help the country to
increase tax revenues while minimising the burden being placed on the taxpayers;
set rates and the tax base at levels comparable to competing regional jurisdictions;
align Malawi’s tax rates with agreements signed with other SADC/COMESA countries or tax regimes; and
ensure that the proper legislative and administrative frameworks are in place.
5. Expenditure
The achievement of fiscal surplus is inextricably linked to prudent and tight management of Government's expenditure. To control the expenditure side of the fiscal equation government needs to:
contain public sector size and wage, (competitive contracting and value for money arrangements);
promote sound planning, management and monitoring of capital projects;
contain off budget expenditure within all Ministries and departments; and
develop and implement a MTEF three-five year budget programme
work with ministries and departments to manage the recurrent expenditure in line with Government priorities.
6. Debt
A budget surplus is crucial for the reduction of debt, since the excess revenue will fund the repayment of debt capital. The principal debt objectives for the medium term would be:
to satisfy the annual borrowing requirements of the fiscal budget; and
ensuring that the debt burden is reduced to sustainable levels over the period.
The strategies may include:
strengthening market mechanism for sale of government securities in the domestic market;
reducing the debt cost;
achieving and maintaining a more prudent debt structure; and
further diversification of the debt portfolio.
7. Monetary Policy
The main monetary policy objective is to maintain inflation at single digits.
This improves confidence in the currency as well as enabling investors to plan with more certainty.
Stability in the exchange rate market and reduction in interest rates encourage long-term foreign investments.
8. Private Public Partnerships (PPPs)
Poor infrastructure increases the cost of doing business and inhibits trade development.
To boost infrastructure development government has to look to innovative partnerships with the private sector.
It is clear that there is agreement on the need for effective legislation to enable PPPs and setting up regulatory structures.
However this is not the case with regard to the operational frameworks that define processes and programme structures, where "it seems that lack of PPP experience results in under-estimates of the complexity required to manage risk and raise the confidence level of the private sector" By Dr Mohan Kaul, Director General and CEO, Commonwealth Business Council (CBC)
9. Just and Accountable Governance
Sustainable growth requires a healthy private sector – one free from corruption and mismanagement, and is a part of improving overall business efficiency.
The Commonwealth Business Council Business Principles provide a good framework for companies, and need to be rolled out and made accessible, especially for the SME sector.
Sustained efforts are required to improve governance, and the formation of the Business Action against Corruption (BAAC) and Civi Slcoiety Action Against Corruption (CSAAC) - joint civil society-public-private initiatives to combat corruption - are developments in the right direction
PFMA
The Act states that Government shall pursue its policy objectives in accordance with the principles of responsible fiscal management which are:
managing total debt at prudent levels so as to provide a buffer against factors that may impact adversely on the level of total public debt in the future;
ensuring that within any borrowing programme the total overall expenditures of the State in each financial year is in the public interest and designed to achieve long-term fiscal stability;
achieving and maintaining levels of the State’s net worth; managing prudently the fiscal risks facing the State;
pursuing policies that are consistent with a reasonable degree of predictability about the level and stability of tax rates for future years and
agreement of Government on the fiscal limits that will apply to the current and future financial expenditure on Ministries and Government projects.
Implementation of Legislation
Conclusion
Malawi does not need any new legislation to ensure sustainable economic growth.
What we need is enforcement of existing legislation
END
Thank you for your attention