RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/79
21 December 2000
(00-5469)
Trade Policy Review Body
TRADE POLICY REVIEW
MOZAMBIQUE
Report by the Secretariat
This report, prepared for the first Trade Policy Review of Mozambique, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from  the Government of Mozambique on its
trade policies and practices.
Any technical questions arising from this report may be addressed to
Mr. J. Degbelo (tel. 739 5583) or Mr. C. Boonekamp (tel. 739 5226).
Document WT/TPR/G/79 contains the policy statement submitted by the
Government of Mozambique.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Mozambique.Mozambique WT/TPR/S/79
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) T HE ECONOMIC ENVIRONMENT vii
(2) I NSTITUTIONAL FRAMEWORK vii
(3) T RADE POLICY INSTRUMENTS viii
(4) S ECTORAL TRADE POLICY DEVELOPMENTS ix
(5) T RADE POLICIES AND TRADING PARTNERS x
I. THE ECONOMIC ENVIRONMENT 1
(1) M AJOR FEATURES OF THE ECONOMY 1
(2) E CONOMIC DEVELOPMENTS 3
(3) T RADE PERFORMANCE 4
(i) Trade in goods 5(ii) Trade in services 8
(4) S
AVING AND INVESTMENT 8
(5) O UTLOOK 9
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 10
(1) I NSTITUTIONAL FRAMEWORK 10
(2) F ORMULATION AND IMPLEMENTATION OF POLICIES 10
(3) P OLICY OBJECTIVES 11
(4) L AWS AND REGULATIONS 12
(i) Trade legislation 12
(ii) Basic law and regulations for corporate registration 12
(iii) Investment code 13(iv) Mining 14(v) Petroleum 15(vi) Export processing zones 15
(vii) Special regimes 16
(5) T
RADE AND INVESTMENT AGREEMENTS AND ARRANGEMENTS 16
(i) Multilateral agreements 16(ii) Trade-related assistance 17(iii) Regional agreements 22(iv) Other trade agreements or arrangements 23
(v) Trade disputes and consultations 23
(vi) Investment agreements or arrangements 24WT/TPR/S/79 Trade Policy Review
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Page
III. TRADE POLICIES BY MEASURE 25
(1) I NTRODUCTION 25
(2) M EASURES DIRECTLY AFFECTING IMPORTS 25
(i) Registration and documentation requirements 25(ii) Inspection, customs valuation, and customs clearance 26
(iii) Tariffs, other duties and charges 28
(iv) Rules of origin 33(v) Anti-dumping, countervailing, and safeguard measures 33(vi) Prohibitions, quantitative restrictions, and licensing 33(vii) Reference prices 33
(viii) Minimum import prices 34
(ix) Standards and other technical requirements 34(x) Government procurement 35(xi) Local-content requirement 36
(3) M
EASURES DIRECTLY AFFECTING EXPORTS 36
(i) Regulations 36
(ii) Export duties and taxes 36
(iii) Prohibitions, licences, and other measures restricting exports 37(iv) Export subsidies 37(v) Duty and tax concessions 37(vi) Export promotion, financing, and assistance 37
(4) O
THER MEASURES AFFECTING PRODUCTION AND TRADE 37
(i) State trading, state enterprises, and privatization 37
(ii) Subsidies and other forms of production assistance 38(iii) Measures for the protection of intellectual property rights 39
IV. TRADE POLICIES BY SECTOR 40
(1) I
NTRODUCTION 40
(2) A GRICULTURE AND RELATED ACTIVITIES 40
(i) General 40(ii) Policy by product category 41
(3) M
INING AND ENERGY 46
(i) Mining 46(ii) Energy 48
(4) M
ANUFACTURING 49
(5) S ERVICES 51
(i) Financial services 51(ii) Tourism, restaurants, and hotels 52(iii) Telecommunications 53(iv) Transportation 54
REFERENCES 57
APPENDIX TABLE 61Mozambique WT/TPR/S/79
Page v
Page
CHARTS
I. THE ECONOMIC ENVIRONMENT
I.1 Real GDP growth, 1995-2002 1
I.2 Imports by origin, 1994 and 1999 6
I.3 Imports by major commodity group, 1994 and 1999 6
I.4 Exports by destination, 1994 and 1999 7I.5 Exports by major commodity group, 1994 and 1996 7
III. TRADE POLICIES BY MEASURE
III.1 Applied MFN tariff rates, by HS section, 2000 29
III.2 Applied MFN tariff distribution, 2000 30III.3 Tariff escalation by 2-digit ISIC industry, 2000 31
IV. TRADE POLICIES BY SECTOR
IV.1 Tariff on manufactured products, by ISIC classification, 2000 50
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 Mozambique at a glance, 1980-99 3
I.2 Domestic inflation, cumulative growth rate, 1995-99 4
I.3 Mozambique's balance of payments, 1994-2000 5
I.4 Mozambique's services account, 1994-2000 8I.5 Mozambique's savings and investment, 1996-2000 9
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
II.1 Mozambique's trade-related laws 12
II.2 Investment projects approved in 1999, and projected employment 14II.3 Selected notifications by Mozambique pursuant to the WTO provisions 17
III. TRADE POLICIES BY MEASURE
III.1 Main features of Mozambique's tariff schedule, 2000 29
IV. TRADE POLICIES BY SECTORIV.1 Agriculture production, 1996-98 41
IV.2 Evolution of the main export products, 1997-98 42
IV.3 Fisheries catch, 1998-99 45IV.4 Small shrimp catch, 1995-98 45IV.5 Exports of mining products, 1998-2000 47IV.6 Exports of energy by destination, 1998-99 48IV.7 Industrial production, 1998-99 49
APPENDIX TABLE
IV. TRADE POLICIES BY SECTOR
AIV.1 Applied MFN tariff averages, by ISIC (Rev. 2), 2000 63Mozambique WT/TPR/S/79
Page vii
SUMMARY OBSERVATIONS
(1) T HE ECONOMIC ENVIRONMENT
1. Mozambique is situated on the
south-east coast of Africa.  Following its
independence in 1975, Mozambiqueimplemented a socialist model of economic
development that resulted in centralizing
government control of the economy, including
banking and agriculture.  The failure of this
strategy became apparent as the economystagnated and suffered significant setbacks.  In
the late 1980s, Mozambique embarked on a
programme of economic reform, but progress
was slow until after the end of the civil war in
1992.  Since the mid 1990s, the pace of reformhas accelerated, and Mozambique has focused
on macroeconomic stabilization and fiscal
reform supported by international financial
institutions.
2. Mozambique's GDP growth has been
among the highest in the world since 1996;
the economy has grown at over 10% a yearover the past few years and fast growth is
forecast through 2002.  However,
Mozambique is still one of the world's least
developed countries, with a per capita GNP of
US$210 in 1998.  Mozambique is one of themost heavily indebted nations in the world.  Its
large debt burden has been an obstacle to
economic development as costs associated
with debt servicing prevent the allocation of
resources that could lead to improvedeconomic capacity, competitiveness and
increased investment. Mozambique has
qualified for debt relief under the IMF and
World Bank Heavily Indebted Poor Countries
(HIPC) Initiative.
3. The Mozambique economy is
essentially dependent on agriculture (more
than two fifths of GDP and the bulk of
merchandise exports).  Traditional export
crops include seafood, sugar cane, cashew
nuts, tobacco, and cotton.  The manufacturing
sector is small, accounting (together with themining sector) for some 19% of GDP;  the
major manufacturing branches include food
processing, tobacco, beverages, textiles, andfootwear.  The mining sector has potential but
remains underdeveloped.  Mozambique is a
net importer of services.  The services sector is
dominated by construction, tourism, transport,
and communications.
4. Mozambique's main trading partners
are South Africa, the European Union, Japan,
and Zimbabwe.  Mozambique's exports are
primarily agricultural commodities, especially
food products, such as non-frozen crustaceans,
and fresh and dried nuts.  Transportationequipment, machinery, mineral products, and
foodstuffs constitute the major imported
products.  Due to climatic conditions,
domestic agricultural production has
decreased during the past few years, causingsharp increases of food imports.
(2) I
NSTITUTIONAL FRAMEWORK
5. The Constitution of the Republic of
Mozambique was adopted in 1990.  A
multi-party system was introduced in 1994.
The Constitution calls for a parliamentary
regime with a separation of powers among theexecutive, legislative, and judicial bodies.
6. Mozambique's President and members
of the Republic Assembly are elected by direct
popular vote for five-year terms;  they may
serve only two consecutive terms.  ThePresident serves as Head of State and appoints
a Prime Minister.  The President selects his
Cabinet on the advice of the Prime Minister.
The Cabinet is responsible for planning and
formulation of government policy.  TheRepublic Assembly, a unicameral body,
exercises legislative power.
7. Mozambique has various statutes that
govern imports, customs duties, investment,
petroleum and mineral-resource extractiveindustries, business licensing, intellectual
property, exports, and other trade-related
matters.  The Government's economic reforms
seek to create an attractive commercial
environment, and to provide incentives for
inward investment.  With few exceptions (e.g.
public utilities), 100% foreign ownership ispermitted in economic activities.WT/TPR/S/79 Trade Policy Review
Page viii
8. Mozambique became a member of the
WTO on 26 August 1996, having signed the
Final Act of the Uruguay Round and the
Marrakesh Agreement on 15 April 1994.
Mozambique grants at least MFN treatment to
all its trading partners.  As with other WTOMembers, Mozambique has adopted the
results of the Uruguay Round in their entirety.
As a least developed country, Mozambique
benefits from the special and differential
treatment afforded developing countries in theform of exemptions or delayed implementation
of certain provisions.  Mozambique is not
currently involved in any dispute settlement
proceeding under the WTO.
9. Mozambique has participated in the
Integrated Framework for Trade-Related
Technical Assistance to Least Developed
Countries (IF) by preparing an assessment of
its needs for trade-related assistance.  In this
context, Mozambique has already received
technical assistance from international
organizations that are part of the IF, includingthe WTO.  Mozambique is still in need of
substantial technical assistance in a wide
range of trade-related areas.
10. Mozambique is a member of the
Southern African Development Community(SADC), and the Cross-Border Initiative
(CBI).  Under the Cotonou Agreement
(successor to the Lomé Convention),
Mozambique receives aid made available to
ACP countries by the European Union, andnon-reciprocal preferential treatment in the
form of exemption fr om import duties for
certain exports.  Likewise, Mozambique's
exports enjoy non-reciprocal preferential
access to the markets of other developedcountries through the Generalized System of
Preferences.  Due to its limited export
capacity, Mozambique has not benefited
significantly from these preferential
arrangements.
(3) T
RADE POLICY INSTRUMENTS
11. Mozambique has undertaken
important reforms since 1987 – and at a more
accelerated pace in the past few years.  Thereforms have resulted in a significantly
liberalized trade regime that is essentially
based on tariffs.  Most export restrictions have
been eliminated, as have foreign exchange
controls.  Mozambique has been making a
determined effort to create an environmentthat is conducive to private investment, both
domestic and foreign.  The Government has
shown a strong interest in expanding exports,
particularly of agricultural and fisheries
products, but limited export capacity hashindered significant export-led growth.
12. Mozambique has recently simplified
the structure of its customs duties;  the tariff
rates currently range from 0 to 30%.  The
tariff structure is modestly escalatory.  Thesimple average applied MFN tariff is 13.8%,
among the lowest import duties in
southern Africa.  In 1999, Mozambique
introduced a 17% value-added tax (VAT).  The
Government expects the VAT to improve
public revenue;  this will facilitate a future
reduction of the maximum tariff to 20%.Excise taxes are levied on automobiles, luxury
goods, alcoholic beverages, and tobacco
products.  Like other WTO Members,
Mozambique has bound customs duties on all
agricultural products;  the tariffs are bound ata ceiling rate of 100%.  In addition, rates on
17 HS eight-digit tariff lines for
non-agricultural products have been bound, at
ceiling rates of either 5% or 15%.
13. In January 1997, the authorities
entered into a contract with Crown Agents for
the management of Mozambique's customs.
The Government also has an agreement with
Intertek Testing Services to perform
preshipment inspections and, for goods notsubject to preshipment inspection,
post-shipment inspections.  Mozambique still
uses the Brussels Definition of Value.
Mozambique did not notify the WTO of
deferred application of the WTO Agreement
on the Implementation of Article VII of GATT
1994.  It has no national legislation regardinganti-dumping, countervailing, or safeguard
measures.Mozambique WT/TPR/S/79
Page ix
14. The National Institute of
Normalization and Quality (INNOQ) is
charged with the administration of standards.
INNOQ is also developing new standards on
the basis of foreign or international ones:  17
are in the final stages of development and 25are in process.  Mozambique maintains certain
controls for sanitary and phytosanitary
purposes.  The related regulations are the
responsibility of the Ministry of Agriculture
and Natural Resources.
15. Mozambique is neither a signatory nor
an observer to the WTO Plurilateral
Agreement on Government Procurement.  The
Ministry of Planning and Finance supervises
all government procurement activities inMozambique, and its guidelines govern all
public procurement, except large projects
involving international funding.  In such cases,
the procurement regulations of the donor
organization are followed.  Preferential
margins of 10% are granted for "national
products" (locally processed goods).  Onlycompanies registered in Mozambique are
allowed to tender for public procurement
under US$750,000.
16. The Government of Mozambique
implemented a privatization programme overthe period 1989-99.  The vast majority of
state-owned companies have been privatized.
However, the Government has maintained
control over companies considered
"particularly important", primarily publicutilities, including telecommunications, ports
and railroads, where government policy has
not yet been formulated, (but is expected to be
announced soon) and certain mining
companies.
17. Responsibility for intellectual property
matters is divided between two departments,
one responsible for patents and other
"industrial" matters, and the other for
copyrights.  The country's first law on
industrial property protection came into force
only in 1999.  No law yet exists on copyrightmatters.  Enforcement of the current
intellectual property laws is minimal.(4) S
ECTORAL TRADE POLICY
DEVELOPMENTS
18. The agriculture sector has been
substantially liberalized since 1997.  Except
for the sugar and cashew nut subsectors, the
Government has withdrawn from directinvolvement in production, processing, and
marketing activities, and has retained only its
role in setting policies.  Various factors have
led to an increase in the price of fertilizers and
thus to a decline in their use.  As a result, theGovernment has identified domestic
production of fertilizers as an activity in
urgent need of foreign investment.  A variable
surcharge is levied on imports of sugar and an
export tax is collected on raw cashew nuts.The average applied MFN tariff for the
agriculture sector (including hunting, forestry
and fishing) is 16.8%
19. The mining sector is not well
developed, but is expected to expand rapidly in
the next few years.  Important possibilities
include titanium, coal, and natural gas.  Thenatural gas is likely to be partially utilized to
expand production of electrical energy,
already an important export commodity.  A
new law is to be promulgated in 2001, to
further promote private investment in thesector.  In Mozambique, natural resources,
including minerals, are the property of the
State.  Mining activities are subject to five
types of licence.  In addition, a licence is also
required for trade in gemstones, gold andother precious metals.  Because production is
largely exported, the eligibility of mining
companies for the export processing zone
regime further improves the incentive schemes
already available for investments in the sector.
20. The Government has reduced tariffs
on industrial inputs, and privatized virtually
all state-owned manufacturing companies.  An
industrial strategy policy was formulated
in 1997 to, inter alia, promote local
processing of natural resources and
the development of export-oriented labour-intensive manufacturing activities.  The export
processing zone regime and the newly
developing Maputo-Johannesburg corridorWT/TPR/S/79 Trade Policy Review
Page x
are to contribute to the achievement of these
goals.  Applied MFN tariffs average 13.8% in
the manufacturing sector.
21. The services sector, like the rest of the
economy, has undergone significant
liberalization, but has only recently receivedserious attention.  All banks and insurance
companies, previously state-owned, have been
privatized, and foreign participation is
commonplace.  Privatization efforts are
envisioned in the telecommunications andtransportation subsectors.  Tourism has
lagged its potential and compares
unfavourably with that of neighbouring
countries.  Mozambique's commitments under
the GATS are limited to financial services(excluding insurance).
(5) T
RADE POLICIES AND TRADING
PARTNERS
22. Trade liberalization is integral to the
economic reform be ing implemented by
Mozambique, which to date has shown
significant signs of success.  Nevertheless,Mozambique's commitments in the WTO fallshort of its trade reforms.  Indeed, ceiling
bindings on agricultural products leave
considerable margins for modifications of
applied tariffs.
23. Continued reform in the services
sector, mainly in areas such astelecommunications and transportation
services, will help to improve the international
competitiveness of Mozambican products by
reducing costs.  Such reforms will also
contribute to the development of otherbranches, including tourism.  Continued
implementation of the privatization
programme, mainly in the services sector,
together with the improvement of
Mozambique's commitments under the GATS,will help to bolster confidence and contribute
to attracting the foreign investment needed.
24. Mozambique would like the WTO
rules to be more widely known domestically;
it needs technical assistance to come into full
compliance with its WTO obligations.