The State President of the Republic of Malawi, His Excellency Dr. Bakili Muluzi, is establishing an independent institute dedicated to supporting Malawi's process of socio-economic transformation and development. The Institute will be a national center of excellence in leadership development, entrepreneurship, policy analysis, and education. The background to this decision is briefly described below.

His Excellency Dr. Bakili Muluzi is deeply concerned with the slow pace of development in Malawi. After almost four decades of independence, Malawi's social and economic indicators are among the worst in the world. The economy continues to experience declining GDP growth, and the GNP per capita of US$220 is less than half of the Sub-Saharan Africa average. Poverty is widespread, with 65 percent of the country's population living below the poverty line and 28 percent living in extreme poverty. About 52 percent of the poor are women, 25 percent of whom are heads of households.

Malawi's population is estimated at 12 million with an annual growth of 3 percent. The population density of 105 persons per square kilometer of land area makes Malawi one of the most densely populated countries in Africa. Life expectancy has dropped from 43 years in 1996 to 37 years in 2002 and is likely to continue falling due to the prevalence of HIV/AIDS. Infant and under-five mortality rates are high at 104 and 189 deaths per 1,000 live births respectively. The maternal mortality rate is 1,120 deaths per 100,000 live births. Educational attainment is low, with only 11 percent of the population above 25 years completing primary school. The illiteracy rate of 40 percent reaches 54.7 percent among women.

A small land locked country, Malawi has been over-reliant on agriculture, making the economy vulnerable to external shocks such as drought and fluctuating transport costs. These problems are compounded by inadequate diversification of the rural economy and under-production of drought-resistant crops. The country has a narrow industrial base, accounting for only 12.7 percent of the GDP. The fiscal situation is fragile, characterized by low savings and investment rates and high inflation. Furthermore, an external debt service of 20 percent of expenditures weighs heavily on the economy.

The Malawi Poverty Reduction Strategy Paper (MPRSP) identifies four strategic pillars for achieving the overall goal of poverty reduction and economic growth. The first pillar focuses on sustainable pro-poor economic growth by ensuring macroeconomic stability, access to credit markets, skills development, and employment generation. The second pillar is human capital development to ensure that the poor have the education and health status needed to lift themselves out of poverty. The third pillar aims at improving the quality of life of the most vulnerable by providing sustainable safety nets. The fourth pillar is on good governance to ensure that public and civil society institutions and systems protect and benefit the poor. Thus, the Government of Malawi recognizes that capacity building is central to the achievement of its principal goal of poverty reduction.

And Yet Malawi has a weak education and training system not capable of effectively redressing the country's capacity constraints. In spite of the increase in enrollment at the primary level from 1.9 million to 2.9 million as a result of the introduction of Free Primary Education in 1994, the education system has low internal efficiency with high drop out (14 percent among girls), high repetition rates (45 percent in standard 1 in rural areas) and low completion rates (30 percent completing standard 8), and poor quality of output. Access at the secondary level is limited to an 18 percent gross enrollment ratio. The pass rate in national examinations is as low as 14 percent. Furthermore, the higher education system is grossly underdeveloped with an annual enrollment of 4,000 representing 1 percent of eligible students at this level.

Due to limited resources, colleges and universities are not able to respond to emerging capacity challenges of the country. A recently completed capacity assessment of the higher education sub-sector revealed that colleges and universities do not have adequate academic staff, teaching, and learning facilities to produce the required numbers and quality of graduates. Furthermore, the limited financial resources are used inefficiently by colleges due to the regressive arrangement of providing boarding facilities to all students.

The advent of HIV/AIDS has widened the human capacity gap in the country. The HIV infection rate among people within the productive age group of 15-49 is now estimated at 15 percent. The high infection rates are causing increased absenteeism and premature deaths. The lack of human capacity is most evident in the public service where there is a severe shortage of teachers, nurses, and other critical service providers.

The overall deterioration and severe capacity deficiencies in Malawi have affected the productivity of the private sector and effectiveness of public sector. The private sector is unable to fulfill its role as the engine of growth due to serious capacity problems of low skill levels among entrepreneurs. In the public sector, the capacity to design and implement policies, manage finances, monitor budgets and the economy, and mobilize and manage external resources is almost non-existent. The civil society lacks basic skills in organization, communication, financial management, and advocacy to fully participate in safeguarding the process of democratization and enhancing social and economic development.

Traditionally, major capacity building and research institutions in Malawi have included the University of Malawi with its five constituent colleges and research centers, Mzuzu University, Domasi College, Teacher Training Colleges, Technical Colleges, and Nursing Schools. In recent times, new institutions have emerged, including the Malawi Institute of Management (MIM), the Natural Resources College, the Technical, Entrepreneurial, and Vocational Education Training (TEVET), The Malawi Entrepreneurship Development Institute (MEDI), the Malawi Institute of Tourism (MIT), Share World, and the Africa Bible College (ABC). However, the human capacity gaps in Malawi are so large to the extent that these institutions are not fully addressing the human resource needs of the nation. Moreover, some of the institutions, particularly the universities and colleges, are far removed from the policy community and are unable to reach out to the private sector.

For example, a recent market survey revealed that while 300,000 people exit the formal education system every year, only 30,000 enter formal employment. The balance enter the labor market untrained. The present capacity of technical colleges is 1,441 students and private institutions are training up to 18,000 school leavers. This demonstrates that additional institutions are still needed. The establishment of the Dr. Bakili Muluzi Institute for Social and Economic Transformation (BMI) will serve as an immediate response to the human capital development needs of the country.