Unemployment rises as preferential trade agreements expire

Malawi's already staggering unemployment figure is set to soar after a foreign-owned textile company shut its doors due to a lack of raw materials. The closure last week of Haps Investment, a Taiwanese garment manufacturer, left more than 2,000 workers jobless - a misfortune likely to have far-reaching consequences for thousands of impoverished households. While local media reports indicated that the company closed because of "capital flight and mismanagement", its directors said the availability of raw materials, generally imported from South Africa, had dried up. Bertha Mindano, a spokeswoman for the retrenched workers, told local journalists the textile company had closed because "the Malawi Revenue Authority seized capital equipment for defaulting taxes". Officials have raised concerns about the likely impact of the closure on thousands of families. The Executive Director of the Institute for Policy Interaction, Rafiq Hajat, called on the authorities to create policies to soften the blow. "This is a huge blow to not only 2,000 workers, but thousands of their dependants as well. If one dependant was supporting about 10 people, then it means 10,000 people will be without financial assistance," he told IRIN. While the labour ministry could not provide updated unemployment figures, 1998 statistics showed that only 13 percent of Malawi's 9.9 million people was employed. Haps Investments was among the first textile companies to export their products to the United States under the African Growth Opportunity Act (AGOA). The company closed just a month after the World Trade Organisation's Multi-Fibre Agreement (MFA) expired on 1 January 2005. The MFA provided protection to the textile industries of developed countries by imposing quotas on low-cost producers such as China, Korea and India. However, manufacturers in the developed world were unable to cope with the high domestic demand and began sourcing textiles from other quota-free countries in the third world. But observers say the closure of a number of foreign-owned businesses was due to a lack of investor confidence. The Malawi Investment Promotion Council last year noted that investors complained about the high cost of transportation, poor infrastructure and intermittent power cuts which hampered business operations.