This paper reports on the results of a consultancy funded by USAID/Malawi, through the Employment and Enterprise Policy Analysis Project, a project of the Employment and Enterprise Development Division, Bureau of Science and Technology, U. S. Agency for International Development (Contract No. DAN-5426-C-00-4098-0). USAID's support for this work is gratefiully acknowledged. The first author listed above served as team leader; since he remained in Malawi after the departure of the other team members, he alone saw the final version and therefore is solely responsible for its contents. The other authors made major contributions to the study, including to the text of the final document. Annex III was completed primarily by Dr. Young; Annex IV, by Dr. Bolnick. Thanks are due to the USAID Mission in Malawi, particularly its economist, Roberta Mahoney, tor support and assistance. Special thanks also due to the Project Coordinator of the READI are Project, Donald Henry, for excensive advice as well as for permitting us to make heavy use of his computer facilities, and to many Malawi business people and gorernmnent officials who shared their insights with us.