Democracy and Governance in Mali
The Development Challenge: Mali is a stable, extremely poor but democratic country that is a strong U.S. ally in the war against terrorism. Overall, 2004 was a year of mixed fortune for Mali. The country was selected as a Millennium Challenge Account eligible country reflecting the tremendous strides it has made toward ruling justly, promoting economic freedom and investing in its people. Successful municipal elections held in May 2004 boosted Mali's credentials as a stable democracy and underlined its commitment to deepening its far-reaching decentralization processes. For the first time in Malian history, women were significantly represented on the ballot. As a result of a reduction in the country's debt burden afforded by the Heavily Indebted Poor Countries Initiative, the Government has increased spending on education and health to about 30.1% and 10.6%, respectively, of the national budget. The Government has also been pursuing efforts to improve social conditions by providing 1,500 affordable low-income housing units in urban areas and launching a presidential initiative to create employment for young people. Despite such efforts, Mali still suffers from extremely low indicators of social well-being. According to the United Nations Development Program's 2004 Human Development Report, Mali ranks as one of the least developed countries in the world, 174 out of 177. During the second half of 2004, the largely agriculture-dependent economy was severely jolted by an invasion of desert locusts that wreaked havoc throughout the Sahel. According to a Food and Agriculture Organization/World Food Program assessment, the insects could destroy as much as 10% of the annual cereal output and significantly damage pastures. Nonetheless, this outcome is considerably better than what was expected at the peak of the crisis in September. A premature end to the rainy season further reduced crop yields. Economic growth in Mali was also negatively affected by an unstable situation in neighboring Côte d'Ivoire, high oil prices, and lower-than-expected gold production.
Mali's formal economy is dominated by three commodities, gold, cotton and livestock, making it extremely vulnerable to price fluctuations and unrest in the region. The current instability in Côte d'Ivoire, Mali's biggest trading partner and a major source of remittances, continues to weigh heavily on the economy. The cost of transportation has increased by 20-30%, despite recent improvements in rail and road routes notably via Senegal and Guinea, and diversification of trade through Ghana and Togo. Steadily rising international petroleum prices have also negatively affected landlocked Mali's trade and imposed a significant cost on the domestic economy. The GDP growth rate for 2004 is now expected to be 1.5% compared to an initial projection of 4.7% and 7.1% realized in 2003. Mali's commitment to a market-based economy is widely acknowledged: it has removed price controls on most goods except for cotton, electricity, water and telecommunications; lifted tariff and non-tariff trade barriers, simplified the regulatory regime and harmonized business laws with neighbors; privatized state-owned firms and liberalized the financial sector. Nonetheless, the high cost of utilities, weak technical and managerial skills, lack of infrastructure, and corruption hinder progress. Private investors are increasingly taking note of Mali's potential, as reflected by the 3% increase in foreign direct investment in the last year. In 2004, a number of new enterprises began operating in the petrochemical, pharmaceutical, animal feed and cotton ginning sectors, developments which augur well for the eventual diversification of the still-narrow economic base. In 2005, South Africa is expected to overtake France as the leading source of foreign investment in Mali largely due to its participation in a $216 million investment in the sugar sector. China's growing commercial portfolio focuses on the textile industry, large construction projects undertaken through joint venture companies, and an investment center. In addition, foreign interest in gold mining remains strong and petroleum exploration efforts are underway.
United States commercial engagement with Mali remains limited. Mali benefits from the African Growth and Opportunity Act under which it has begun exporting yarn to Mauritius to be made into clothing for the U.S. market. The country's fledgling textile industry is a potential source of product as well as a market for U.S. equipment. On the security front, Mali is a potential breeding ground for fundamentalism and possible terrorist networks, particularly in the often conflict-laden northern parts of Mali. Nevertheless, the Government remains a firm ally in the war on terrorism and participates in the Pan Sahel Initiative.
The USAID Program: USAID continues to pursue the joint State Department and USAID goals of democracy and human rights, economic prosperity and security, social and environmental issues, and humanitarian response, as well as management and organizational excellence. USAID will use FY 2005 funds to increase people's incomes and well-being, improve their dismal health and education status, and provide tools to govern effectively. Programs are geographically focused and are being increasingly coordinated with other United States Government (USG) agencies and donors. Cross-cutting activities target gender, HIV/AIDS and the creation of integrated development messages, USAID led the USG's quick response to the locust invasion and was the first major bilateral donor to respond by releasing more than one million dollars in emergency assistance which served to catalyze contributions from the rest of the donor community thereby helping to avert a major food crisis.
(Excerpted from the 2006 Congressional Budget Justification for Mali)
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