Breaking Out of Economic Isolation and the Poverty Trap

Abstract

Previously, in Chapter 6 we saw that most Malawians live below the poverty line, subsisting in rural villages or urban shanty towns which lack even the most basic amenities. A significant minority do not have access to clean water or sanitation. Economic isolation is made worse by poor roads and limited market access. In these circumstances, many households find it difficult to meet basic subsistence requirements, much less generating a surplus for the market. High transport costs push up prices of essential imports of fertilisers and fuel is costly making it difficult for Malawi to compete in international trade, thus reducing prospects for export-led growth. This unhappy picture is compounded by a poor investment climate, the absence of foreign direct investments and constraints on the local private sector in increasing investment, employment and growth.