Mali as a Developing Country

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Introduction

This is a report about Mali. It focuses on a range of issues, challenges, and controversies that Mali faces as a developing nation. It also highlights how actors and interests affect the country’s development.

Mali is a West African landlocked country. Over the last 20 years, Mali has strived to develop a stable democracy after the coup that toppled Moussa Traoré. Amadou Toumani Touré (ATT) ruled the country in a way many observers claimed was stable. However, in 2012, Mali has experienced a coup twice. This situation has made the country unstable for investments.

According to the African Report of 2011, Mali has over 13.3 million people (African Report 1). About 33 percent of people live in urban areas. The country’s GDP (gross domestic product) was approximately US$ 10.98 billion in 2011 (see fig. 1).

Mali Profile, 2012 from the African Report, 2012

Figure 1: Mali Profile, 2012 from the African Report, 2012

Before the general election of 2012, many citizens and professionals believed that the new president would bring stability to the country. They presumed that the new president would tackle the issue of neglected policies and act tough on elements of Al Qaeda that reside in the Maghreb in the northern part of the country.

This group is responsible for several attacks on government establishments. Also, there are also Tuareg militias in northern Mali. These groups present serious threats to the security of the country.

Recent Developments

The African Economic Outlook report notes that the real GDP grew by 1.1 percent. The primary sector recorded a growth of 5.8 percent. The secondary sector had a growth of 8.3 percent while the tertiary sector recorded a growth of 3.8 percent.

A forecast had predicted a growth of 6.9 percent based on good yields from agricultural sector rising prices of gold (Reuters 1) in the international markets. However, the unstable political environment has negatively affected these gains (African Economic Outlook 1).

The growth in population has increased consumption. Consumption increased by 2.8 percent during the year 2011. This was due to pay rise among civil servants and increased employment in other areas of the public sector.

In the last five years, the government of Mali has endeavored to improve the northern part of the country through road construction. It has spent over “$1.4 billion on road projects, which covers 227 kilometers from Bamako to Ségou” (African Report 1). The aim of this project is to reduce the marginalization of northern Mali. The Chinese contractors are also working on an airport at Kayes. This will supplement the main airport at Bamako.

There are also developments in power supply in which the government aims to supply power to iron-ore and gold mining areas. These power projects will provide additional 84MW to the national grid upon their completion. The dams shall also supply agricultural water to nearby farms.

Prices of commodities in the global markets have favored Mali’s export earnings from gold. Indian firms have also invested in the country to increase the mining of iron-ore.

The military seizure of power in March 2012 has altered support from the US and other development partners.

To facilitate economic growth, the government of Mali has identified key investment areas and offer incentives for investors. These areas include:

Agribusiness
Human and animal health promotion enterprises
Communication
Tourism and hotel industries
Mining and metallurgical industries
Housing development
Transportation
Cultural promotion enterprises
Fishing and fish processing
Vocational and technical training enterprises
Livestock and forestry
Water and energy production industries

In 2013, the World Bank report of Doing Business Mali indicated a serious decline in ranking of some key areas relative to the previous year (World Bank 1). Mali dropped to position 151 in 2013 compared to position 145 in 2012. This represented a drop of six positions out of 185 countries in the report. We can attribute such negative developments to the military seizure of power in March and December of 2012.

Table 1: Doing Business 2013: Mali

Topic Rankings	DB 2013 Rank	DB 2012 Rank	Change in Rank
Starting a Business	118	115	-3
Dealing with Construction Permits	99	93	-6
Getting Electricity	115	111	-4
Registering Property	91	91	No change
Getting Credit	129	127	-2
Protecting Investors	150	147	-3
Paying Taxes	166	167	1
Trading Across Borders	152	150	-2
Enforcing Contracts	133	133	No change
Resolving Insolvency	120	118	-2

Source: The World Bank, 2013 (Doing Business 2013 data for Mali)

Openness to Foreign Investment

The government of Mali has advocated for foreign investments in the past. Under this initiative, both foreign and domestic firms undergo the same processes. The country has enhanced structural adjustment facility (ESAF) to encourage foreign investment and resource mobilization since 1992.

The ESAF got support from the World Bank and the IMF. To fight poverty in the country, the World Bank and other partners in development recommended the important roles of the private sector in facilitating development.

Mali’s past structural adjustment program had focused on key areas like mining, investment, and trade for economic growth. The government has encouraged direct investment and export-oriented economy through its development policies.

Foreigners doing business in Mali can own 100 percent of their ventures. Also, the government allows foreigners to buy shares in during privatization of public companies. On this note, foreign investors can also create joint ventures with citizens of Mali.

The government uses job creations as a way of determining tax rates for firms. It argues that companies that hire young graduates should have tax advantages because they pay reduced rates.

Political Violence

Mali is a multi-party state. For the last two decades under ATT administration, the country has strengthened its democracy. This stability has encouraged investments from both local and foreign areas. There are instances of political demonstrations, students’ riots, and violence. However, these are minor cases, which cannot deter investors.

Mali is mainly Islamic nation. However, it has a tolerant form of religion. The Al Qaida in the north has created instability in the region by attacking government installations and declaring independence.

The government also has to deal with Tuaregs in the north. According to the Heritage Foundation 2013, these Tuaregs are fighters who had served in “the security forces of former Libyan leader Muammar Qadhafi” (Heritage Foundation 1). They have perpetuated fragile rule of law in Mali.

Most recently in 2012, the military took control of Mali from the government. This has affected Mali because investors have shunned the country as an investment destination. Also, donors, especially from the US, have withdrawn their support to Mali (Bureau of African Affairs 1). Mali has good relationships with the neighboring countries, but coupled to sanctions from some countries (Callimachi 1).

From the recent activities, it is evident that the Malian army lacks the capacity and resources to control insecurity in the country. This was the case when rebels took control of several towns in Mali. Security in the country depends on safety in the northern Mali and political transition.

Corruption

In Mali, corruption remains a crime that is punishable under the law. Despite such provision in the law, there are widespread cases of corruption in Mali. These cases affect large-scale investors and investment. Corruption has been a major obstacle to foreign direct investment in the country.

Government officials openly take bribes for routine jobs. According to Transparency International (TI) Corruption Perceptions Index 2012, Mali ranked 105 out of 176 countries (Transparency International 5). The score of 34 represents countries with high rates of corruption.

Table 2: Corruption Ranking:

Rank	Country	CPI score
105	Mali	34

Source: Transparency International Corruption Perceptions Index 2012

Corruption in Mali is rampant in procurement procedures and the criminal justice system. The government officials demand their commission that ranges from ten to 15 percent of the cost. The government created the “Direction Generale des March Publiques” in an attempt to fight procurement corruption.

This body must establish that all procurement processes meet “requirements of fairness, price competitiveness, and quality standards” (Bureau of African Affairs 1). This shows that the government has committed to fight corruption in the public sector.

Cases of corruption are severe in dispute settlements. Also, the judiciary is slow and incompetent. Judiciary officials have low pay while the system has inadequate resources. These factors have increased the rate of corruption in Mali. Countries that operate under anti-corruption laws may find it difficult to operate and compete with firms that do not adhere to any form of ethics or do not have such legislation. This is why Chinese companies may thrive in Mali.

In some cases, the Court of Appeal has turned questionable judgments. Also, Mali has weak copyright law (Heritage Foundation 1). While such laws are available to protect inventions, the weak, corrupt, and inept judiciary has facilitated abuse of copyright law.

Labor

Labor is readily available in Mali, but with varying skills, experience, and qualifications. In the past, some qualified individuals have lost their jobs from state-owned firms. These people have increased the rate of unemployment in the country. Most graduates are also in search of jobs.

According to African Economic Outlook, the results of “the national employment policy and initiatives such as the youth-employment program (YEP) are below expectations as unemployment hits young people hardest, with the rate standing at 15.4% for 15‑39 years old” (African Economic Outlook 1).

Also, young job seekers represent “81.5% of all unemployed people” (African Economic Outlook 1). On the contrary, the supply of qualified labor in areas with high growth like mining, telecommunication, and construction has been low.

According to the Global Economy, the average rate of unemployment in Mali for the last ten years is 8.8 (Global Economy). It notes that the average rate provides an accurate picture because a figure from a single year might be misleading.

Table 3: Unemployment rate: averages for the period from 2000 to 2010

Country	Value	Country	Value
United States	5.91	Mali	8.8
India	4.37	Hong Kong SAR, China	5.51
United Kingdom	5.52	Germany	8.73
Canada	7.09	Australia	5.45

Source: The Global Economy, 2013

The Accelerated Economic Growth Strategic Objective (AEG)

The USAID started a ten-year program (AEG) that aimed at increasing economic growth and combating poverty through a partnership with the government, private firms, and development partners.

The AEG focused on promoting agricultural sector, trade in selected goods, and facilitating access to financial services (USAID 1). The aim of this initiative is to accelerate trade in agricultural products. It also focuses on promoting fast trade in products that Mali has a relative advantage.

The structural reform in Mali did not bring the desired changes because the growth stagnated at some points. Mali relies on export commodities, which suffer from fluctuations in international prices. This suggests that Mali must focus on alternative ways of growing its economy rather than depending on exports. Diversification of the economy shall create jobs and improve the competitive advantage of the country.

Mali must also form a partnership with neighboring countries to promote regional trade. Mali is a member of the West Africa Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS) that consist of 15 states. Such trade agreements have preferential advantages in terms of gaining access to market opportunities.

The country is also a member of the World Trade Organization (WTO), as well as the African Growth and Opportunity Act (AGOA). Under AGOA, the country has free access to the US market. The USAID in Mali has facilitated trade under the Sustainable Economic Growth Strategic Objective (SEG). SEG has aimed to improve the accessibility of market information under the OMA program.

OMA has emphasized livestock and cereal produce. It aims to provide farmers with reliable market information that can improve trade in the agricultural sector. OMA has focused on developing the same system across the West African region. It also organizes market outlook forums for regional farmers. In this regard, the program has enhanced the integration of the region’s economy.

The Africa Trade and Investment Program (ATRIP) has conducted many studies in the agricultural sector, especially on manufacturing, rice, and livestock sectors to establish growth opportunities in the sector. The USAID has also organized training and development programs under ECOWAS and WAEMU. Such training programs develop business skills, capacity, and encourage participation in the market.

The USAID reviewed challenges to Mali’s economic growth and listed them as follow:

Inadequate managerial skills in most enterprises because many of them are informal
Underdeveloped trade-related infrastructures
Lack of business support services like financial aid, market information
Weak links between private and public organizations
Weak integration and enforcement of regional agreements

Government Reforms

The private sector is small in Mali with wide differences in cash flow. Such small enterprises depend on informal relations and networks. Private firms are also small. The government of Mali has focused on developing the private sector to spur economic growth and reduce unemployment. According to the Doing Business report, Mali recorded some improvements among WAEMU member states.

However, the political instability in the country has eroded such gains. In the year 2011, the government of Mali introduced a new investment standard to promote the growth of the private sector. On this note, technical and financial partners like AfDB (the African Development Bank) have also focused on Mali’s private sector by conducting studies and provide the missing information about the sector.

Accessibility of financial services in Mali has remained low with only “10% of Malian companies having obtained credit to finance their activities” (African Economic Outlook 1). Gaining access to credit facilities has been difficult due to the inability of traders to provide adequate guarantees, complex applications procedures, high-interest rates, and a lack of real need for credit.

In this respect, the government has responded through studies that have resulted into “the creation of a private-sector guarantee fund (FGSP) and a capital-stock investment company (SICR)” (African Economic Outlook 1). FGSP aims to guarantee short-term credit facilities, whereas SICR aims to promote the acquisition of shares in firms.

The AfDB has also responded by providing a loan to the Malian Solidarity Bank to spur growth in the private sector, especially among small and medium enterprises and traders. The government also embarked on privatization to induce development in the private sector.

Mali experiences serious environmental challenges such as desertification, shrinking forest cover, silting, inadequate rainfall, and decline in biodiversity. These conditions are likely to increase in the coming years. As a result, the government and other private partners have embarked on effective management of environmental resources to combat the effects of climate change.

Bilateral Economic Relations and the US assistance to Mali

In terms of trade and investment, Mali remains a small market for the US. However, Mali has a huge potential for growth because it has not exploited its resources for economic expansion. The volume of trade between the US and Mali remains low.

Before the military coup of March 2012, there were a number of US agencies like USAID and Peace Corps among other organizations, which provided developmental assistance to Mali. The USAID focused on promoting peace and stability in northern Mali and enhancing political and economic integration of West African states.

The US Department of Defense has initiated training programs in Mali to develop the capacity that can allow Mali to combat security challenges it faces from rebels and Al Qaida. There are also agricultural development plans.

However, following the military seizure of power in Mali, the US ended all aid to Mali except humanitarian aid. The US reviews such assistance on a case-by-case basis. It will only resume development programs in Mali if the country reinstates a democratic government.

Conclusion

Mali has made some achievements since it embraced democracy some 20 years ago. However, the instability in the north has made the country vulnerable to terrorists’ activities. Also, the current political instability has eroded gains that the country has achieved.

Mali depends on agriculture and exports of gold and iron-ore for economic growth. However, fluctuations in the international market prices have affected the economic growth of the country. As a result, development partners and the government of Mali have seen the need to diversify areas of economic growth.

Weaknesses in key institutions like the judiciary and other public offices have facilitated the poor growth of the economy by encouraging corruption. Corruption has made an inept justice system that is prone to political control.

The country has not reformed various issues like free trade, investment, and agreements, which affect investors.

Mali has started some reforms in public and private sectors to spur economic growth. However, these reforms face serious challenges like political instability and weak institutions. The country must gain investors confidence and develop credit facilities for small traders to spur economic growth in the private sector. This will facilitate trade, investment, and increase consumption.

Works Cited

African Economic Outlook. Mali. 2012. Web.

African Report. Mali: Country Profile 2012. 2012. Web.

Bureau of African Affairs. U.S. Relations With Mali. 2012. Web.

Callimachi, Rukmini. Post-coup Mali hit with sanctions by African neighbours. 2012. Web.

Global Economy. Mali: Unemployment Rate. 2013. Web.

Heritage Foundation. 2013 Index of Economic Freedom: Mali. 2013. Web.

Reuters. Mali gold reserves rise in 2011 alongside price. 2012. Web.

Transparency International. Transparency International Corruption Perceptions Index 2012. London: EYGM Limited, 2012. Print.

USAID. Mali Accelerated Economic Growth Strategic Objective Program. 2007. Web.

World Bank. Ease of Doing Business in Mali 2013. 2013. Web.

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