VZCZCXRO7249
RR RUEHDU RUEHJO RUEHMR
DE RUEHLG #0442/01 1450959
ZNR UUUUU ZZH
R 250959Z MAY 06
FM AMEMBASSY LILONGWE
TO RUEHC/SECSTATE WASHDC 2785
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC 0449
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHDC

UNCLAS SECTION 01 OF 04 LILONGWE 000442 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KDEM KCOR MI
STATE FOR AF/S, INR/AA 
USAID FOR AYANNA TOURE 
 
SUBJECT: MUTHARIKA AT TWO YEARS: A MIXED RECORD 
 
Ref: A) Lilongwe 406  B) Lilongwe 433 
 
LILONGWE 00000442  001.2 OF 004 
 
 
¶1. (SBU) Summary: President Mutharika this week marks two 
years in office, and his record is one of mixed success. 
Mutharika has undertaken a number of popular initiatives to 
restore order and accountability in Malawian society, and his 
program of macroeconomic reforms has won praise from donors. 
But Mutharika's tenure has been marred by constant political 
instability, an increase in politically-motivated 
prosecutions, and serious doubts about his ability to put in 
place economic policies that will attract investment and 
improve long-term growth.  Our bottom line:  Incremental 
economic reform and political modernization is still possible, 
but it will be harder than we thought.  Real and comprehensive 
reform awaits a generational change.  End summary. 
 
Success is in the Eye of the Beholder 
------------------------------------- 
 
¶2. (SBU) On balance, most Malawians would say that the 
Mutharika administration has so far been a success, although 
perceptions differ between Malawians and foreign donors on the 
government's most important accomplishments. 
 
¶3. (SBU) In a recent op-ed piece, the president's spokesman 
cited the "restoration of dignity, national pride, discipline 
and moral obligations" as first on the GOM's list of 
achievements.  The return to a past era of orderliness has 
been a clear and consistent theme of the Mutharika government. 
Most Malawians view the first ten years of multiparty 
democracy under Bakili Muluzi (1994-2004) as a period of 
disorder, chaos, economic turmoil, and corruption.  The period 
is commonly referred to as "the lost decade," and many 
Malawians now look nostalgically at the order and discipline 
that characterized the era of the former dictator Hastings 
Kamuzu Banda. 
 
¶4. (SBU) Mutharika has seized on that public longing for a 
return to a perceived era of former glory, with great 
political success.  Reversing the policies of his predecessor, 
who banished all references to Dr. Banda, Mutharika has 
restored Kamuzu's name to prominent landmarks, and fast- 
tracked construction of a $600,000 mausoleum in Lilongwe for 
Banda, a project that had languished under the Muluzi 
government.  Mutharika dedicated the mausoleum with great 
fanfare earlier this month, and its construction has won 
almost universal public approval as a fitting tribute to "the 
Father of the Malawi Nation." 
 
¶5. (SBU) Other popular Mutharika policies aimed at restoring 
societal order include his anti-corruption campaign, the 
forced removal of vendors from city streets, the ordered 
return of refugees and asylum seekers to refugee camps, the 
destruction of illegal buildings, and efforts to improve the 
performance of the civil service.  Such measures have been 
also been popular because of a traditional Malawian affinity 
for "strong" leaders who give orders and get things done. 
 
¶6. (SBU) A senior presidential advisor recently told us that 
the average Malawian is concerned about food, health, and 
education, in that order.  Mutharika's most popular policy 
moves have been in the all-important agricultural sector, and 
he has concentrated heavily on food security.  He instituted a 
massive fertilizer subsidy that Malawians credit (along with 
good rains) with giving the country its best maize harvest in 
the past ten years.  Also very popular has been an expansion 
of a donor funded food-for-work program, and a giveaway of 
thousands of manual irrigation pumps.  Mutharika touts grand 
food-related infrastructure projects such as large silos to 
store grain for lean periods, dams, and irrigation schemes, 
all of which have won solid public approval. 
 
One Step Forward, One Step Back 
------------------------------- 
 
¶7. (SBU) While most Malawians view these actions as positive, 
many remain cautious about Mutharika and there is a sense that 
his good policies have been offset by significant negatives. 
 
¶8. (SBU) Much of Mutharika's tenure has been consumed by 
political instability that conflict-averse Malawians find 
instinctively uncomfortable.  They applauded the launch of his 
anti-corruption campaign in 2004, but were uneasy with the 
resulting open warfare between Mutharika and his former United 
Democratic Front (UDF) colleagues that persists to this day. 
 
LILONGWE 00000442  002.2 OF 004 
 
 
Most Malawians approved of Mutharika's resignation from the 
UDF, but were disappointed when he quickly formed another 
party and attracted many of the same tired politicians to 
join.  Many people viewed the move as business-as-usual 
Malawian politics, and felt that Mutharika's new party would 
be little different from its corrupt predecessors. 
 
¶9. (SBU) Many Malawians are unhappy with the clear increase in 
political prosecutions that has taken place in recent months 
(ref A).  The arrests and prosecutions of a number of 
opposition MPs, journalists and other political opponents are 
seen as a worrisome trend that could return Malawi to the 
denial of political freedom that was standard practice under 
Dr. Banda.  Many people side with Mutharika in the belief that 
Vice President Chilumpha has neglected his duties, but they 
are not comfortable with the undignified treatment of the vice 
president, in which he has been shown in the media riding in 
the back of police vans and speaking to his family members 
through prison barbed wire. 
 
¶10. (SBU) The recent visit of President Mugabe was strongly 
opposed by many Malawians and frowned upon by businesspeople 
who complained that the visit damaged investor confidence. 
The government managed to keep a lid on public protests by 
pacifying human rights NGOs and arresting a number of 
opposition figures before the visit.  Many people worry about 
Mutharika's close ties to Mugabe, and most Malawians have no 
interest in emulating Zimbabwe's example on human rights or 
economic policies. 
 
¶11. (SBU) Concern about the administration's direction is 
sufficiently widespread to prompt Malawians to question the 
President's motives, even when they are evidently well- 
intentioned.  Many commentators have expressed concern about a 
particular Banda-imitation activity: annual "crop inspection" 
tours.  Mutharika wants to encourage the farmers by showing 
interest in what they do and how their crops are doing.  But 
to many, the inspections evoke the era when Dr. Banda ordered 
peasants to grow certain crops and meted out punishment for 
non-compliance, a policy that distorted agricultural markets 
and contributed to Malawi's overwhelming and unhealthy 
dependence on maize as a primary cereal crop.  In a similar 
vein, a number of parliamentarians also wonder whether the 
administration intends to re-invent the unlamented Banda-era 
"Forfeiture Act" in the form of the draft anti-money 
laundering legislation, and we and the bill's sponsors have 
spent significant effort to distinguish a modern money- 
laundering regime from the tool used during the Banda period 
to seize houses, businesses, and other property. 
 
¶12. (SBU) Most Malawians are not pleased with the performance 
of Parliament in the past two years, and deplore the lack of 
harmony between Mutharika and parliamentary leaders.  Last 
year's impeachment fight was the most prominent example of a 
Parliament that is seen as bogged down in political squabbles 
and unable to get any work done. 
 
The Foreigners' View of Success... 
---------------------------------- 
 
¶13. (SBU) Western perceptions of Mutharika's success are 
rather different.  In the eyes of donors, his control of 
government spending, lowering of domestic debt, and focus on 
macroeconomic fundamentals are the signal achievements thus 
far.  In the face of IMF pressure, the GOM has allowed the 
kwacha to depreciate toward a more realistic value. 
Mutharika's emphasis on fiscal discipline won the confidence 
of donors early on, and aid flows have increased.  The IMF 
granted a new Poverty Reduction and Growth Facility (PRGF) in 
August 2005, the World Bank has expanded its program and 
granted a new structural adjustment loan, and European 
bilateral donors have augmented budget support. 
 
¶14. (SBU) The GOM won praise from donors for its cooperative 
and timely response to the past year's food security crisis, 
and the coordinated action of donors and government averted 
massive hunger. 
 
... and Failure 
--------------- 
 
¶15. (SBU) Despite a stated orientation toward reform and some 
clear successes, the Mutharika government faces many problems, 
and some of its proposed solutions are cause for concern. 
 
 
LILONGWE 00000442  003.2 OF 004 
 
 
¶16. (SBU) Donors are constantly frustrated by painfully slow 
decision making at the highest levels of government.  Major 
policy documents languish in Cabinet for months at a time, and 
many important decisions are seemingly never taken.  The 
vicious battle over impeachment in late 2005 has left 
parliament deadlocked, and Mutharika's minority government has 
been unable to pass any significant legislation in over a 
year.  There is a large backlog of bills awaiting passage that 
are critical to any forward movement on reform. 
 
¶17. (SBU) While the GOM has made honest efforts at addressing 
long term food security problems, its policy solutions, such 
as massive fertilizer and seed subsidies and construction of 
costly grain silos, are not necessarily the best prescription 
for success.  Mutharika's emphasis on other fanciful schemes 
such as his pet project Shire Zambezi Waterway and the 
construction of a new technology university in Lilongwe 
exhibit a certain detachment from reality, and an 
unwillingness to tackle more concrete problems that are within 
the GOM's power to resolve. 
 
¶18. (SBU) Democracy remains fragile.  The above-mentioned 
political prosecutions are cause for concern, although the 
recent firing of Attorney General Ralph Kasambara may change 
the outlook.  The GOM has yet to produce any solid evidence 
against Vice President Chilumpha in his ongoing treason case. 
Despite significant donor pressure, the GOM shows little 
interest in conducting long-postponed local government 
elections.  Mutharika dismissed all of the elected district 
and municipal assemblies last year when their terms expired. 
This has led to a lack of oversight of local and district 
administrators, and deprives the country of a feeder system 
for the development of younger political leaders. 
 
¶19. (SBU) Mutharika's recent pronouncements on economic policy 
are of particular concern.  His mandated minimum prices for 
tobacco have caused major disruptions in the tobacco market 
(which provides 60% of Malawi's foreign exchange) and have 
precipitated an ongoing forex shortage that could have very 
serious implications for the country's balance of payments 
later in the year (ref B).  Mutharika has announced his 
intention to intervene in the markets of other "strategic" 
crops such as tea and cotton, and producers and buyers in 
those markets are very nervous about the prospect of 
government interference. 
 
¶20. (SBU) During a recent performance review, a visiting IMF 
mission expressed serious concern that the GOM's structural 
reforms in public expenditure have stalled, and signaled that 
Malawi's anticipated HIPC debt relief may not be as easily 
achieved as previously thought. 
 
¶21. (SBU) Malawi's business community continues to worry about 
increased political risk and businesspeople complain that 
instability is driving away investment and raising the cost of 
capital on international markets.  Among business leaders, 
Mutharika is no longer seen as the reformer they had hoped for 
in 2004, when he launched his anti-corruption campaign and 
promised reforms to stimulate investment. 
 
¶22. (SBU) The GOM has made a laudable effort to correct 
Malawi's macroeconomic fundamentals, but there has been almost 
no progress on making essential (and relatively easy) 
improvements to the business climate that will attract new 
investment.  There are still major problems with transport, 
electric and water utilities, tax administration, and customs 
procedures.  The lack of GOM willingness to fix these problems 
is doubly surprising, since a raft of studies have clearly 
identified the problems and Mutharika himself constantly talks 
of improving the business environment.  The GOM's program for 
privatization of unprofitable state enterprises is moribund, 
and only one major privatization has taken place since 
Mutharika took office.  Many observers believe that the 
president "talks the talk" of economic liberalization, but his 
actions show that he doesn't really believe the message. 
 
Comment 
------- 
 
¶23. (SBU) Clearly the optimism that was present in early 
months of this administration, on the part of Malawians and 
foreign observers alike, has been greatly tempered.  Mutharika 
wants to be a reformist president, but his reforms are slow 
and not terribly dynamic.  Ironically, his vision of reform 
looks backward rather than to the future, and he seems to 
 
LILONGWE 00000442  004.2 OF 004 
 
 
idealize a Malawi of the 1960s rather than pushing his country 
to be a competitor in the globalized world of the 21st 
century. 
 
¶24. (SBU) Malawi's transition to democracy is not yet 
complete.  It came about through exhaustion and mortality, and 
left behind an older generation of leaders who grew up under 
the Banda dictatorship and who sometimes seem to be struggling 
not to reform and democratize Malawi but to claim the mantle 
of the Life President and to restore the perceived order and 
unity of his era.  Mutharika is clearly a politician in this 
mold.  He will achieve some positive steps for Malawi, but it 
will take longer and be much harder than we thought two years 
ago.  Real and comprehensive reform will probably need to wait 
for the coming of a new generation of Malawian leaders. 
 
EASTHAM