Sustainable Development Impacts of Investment Incentives

The study finds that investment incentives are not the primary drivers of FDI in Malawi's tourism sector; instead, investors are attracted by natural resources, low labour costs, and the environment. Fiscal incentives, such as customs procedure codes (CPCs) and tax waivers, often benefit large hotels or local investors rather than the intended small, remote operators, and may negatively impact the environment by financing polluting vehicles. The report recommends shifting toward targeted, measurable incentives for staff training and specific locations, improving data disaggregation by the Malawi Revenue Authority, and implementing a common code of ethics to ensure sustainable development.

• Investment incentives do not determine FDI in the tourism sector. Investors are primarily driven by the country's natural resources, the cost of raw materials, the availability of relatively cheap labour, and macroeconomic factors such as inflation, foreign exchange, and interest rates.
• Fiscal incentives are often misdirected, benefiting large 'branded' and medium-sized hotels rather than the small and remotely located operators they were intended for. Approximately 53 per cent of lost tax revenue may be going to the wrong targets and failing to attract the desired FDI.
• The process of accessing investment incentives is described as long, complex, and expensive, making them effectively inaccessible for operators located outside the capital city, Lilongwe.
• Investment incentives for the car hire subsector may be financing environmental pollution, as these waivers apply to air-polluting vehicles. This creates a conflict with sustainable environmental development goals.
• There is a significant lack of quality, disaggregated data and monitoring mechanisms, which hinders the government's ability to measure the impact of incentives on FDI and sustainable development.
• While environmental impact assessments are required at the start of business establishment, there is a critical lack of follow-up audits and monitoring mechanisms to ensure ongoing compliance.
• The tourism sector's economic impact is constrained by low labour productivity and a lack of skilled indigenous personnel, despite the attraction of low minimum wages (less than US$ 1 per day).
• Regional trade agreements, specifically through SADC and COMESA, have influenced the sector by promoting trade liberalization and creating market access, which has increased the number of South African investors in Malawi.

APA

Nsiku, N., & Kiratu, S. (2009). Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/sd_inv_impacts_malawi.pdf

Chicago

Nsiku, Nelson, and Sheila Kiratu. Sustainable Development Impacts of Investment Incentives. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/sd_inv_impacts_malawi.pdf.

Wikipedia

{{cite report |last1=Nsiku |first1=Nelson |last2=Kiratu |first2=Sheila |title=Sustainable Development Impacts of Investment Incentives |publisher=International Institute for Sustainable Development |date=2009 |url=https://www.iisd.org/system/files/publications/sd_inv_impacts_malawi.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nsiku2009sustainable, author = {Nsiku, Nelson and Kiratu, Sheila}, title = {{Sustainable Development Impacts of Investment Incentives}}, institution = {International Institute for Sustainable Development}, year = {2009}, url = {https://www.iisd.org/system/files/publications/sd_inv_impacts_malawi.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }