Mozambique Mission Report
14-24 February 2008
Elumba Jean Denis N.
GRIPS Development Forum
1. Purpose of the mission
Prof. Ohno was invited by the Japan Bank for International Cooperation (JBIC) todeliver presentations at two workshops jointly organized by the JBIC, theInvestment Promotion Center of Mozambique (CPI) and the Board for Economic
Zones and Accelerated Development (GAZEDA) on the theme “EconomicDevelopment of the Nacala Development Corridor: Learning from the Experiencesof Vietnam”. Elumba Jean Denis N. was also dispatched by GRIPS to join Prof.
Kenichi Ohno on a fact-finding mission to Mozambique on the same itinerary (fromthe 14th to 24th of February 2008).
In addition, we met key stakeholders responsible for economic development
planning to learn how policy dialogue is coordinated within the government andbetween the government and the private sector, in order to understand thestrategic importance of the Nacala Development Corridor within the broader
framework of the national economic development plan of Mozambique.
2. Background to the mission
The Nacala Development Corridor, with the Nacala port, strategically situated on
the Mozambique channel (a busy and important route for East African commerce)on the Indian Ocean is a region with vast untapped natural resources that offer
great development potential for agricultural, mining, energy, tourism, andindustrial development. However, inadequacies of the infrastructure networks
have hampered the utilization of this development potential. While somerehabilitation has been done along the corridor, there is great need for more
extensive rehabilitation in certain sections.
The Nacala Development Corridor is one of the first development corridors
identified as a regional development priority by the NEPAD. The port of Nacala isan exceptionally good natural port that can accommodate almost any size ofvessel. If operated efficiently, and utilized at greater capacity, it should become a1

major source of economic activity in Mozambique, and the region.
The government of Japan gives high priority to the development of the Nacala
Development Corridor, with particular focus on rehabilitation of roads. A feasibility
study for the rehabilitation of the road between Nampula and Cuamba has alreadybeen conducted by the Japan International Cooperation Agency (JICA). The
project is at a negotiation phase between the two governments for possible
finance agreement through the JBIC and the African Development Bank (AfDB).
In view of the similarities between Mozambique and Vietnam, and its own
involvement in infrastructure finance in South East Asia, the JBIC has beenpromoting trilateral cooperation between Japan, Mozambique and Vietnam for thedevelopment of the Nacala Development Corridor. It is in this regard that the JBIC
has encouraged exchange of experiences between these countries in the area ofinfrastructure development. In August of 2007, the JBIC organized a “sharing ofexperience” mission to Vietnam and invited officials from Mozambique involved ineconomic development planning to participate.
This mission to Mozambique is a follow up of the first “sharing of experience”
mission in Vietnam. This time, the mission was expanded to include, besides
officials involved in infrastructure and economic development planning in both
Mozambique and Vietnam, Japanese academics with background experience in
East Asia economic development planning and other multi-sectoral participants.
This report reflects the understanding that has emerged from consultation withvarious stakeholders on the structure of the economic development of the Nacala
Development Corridor.
3. Mozambique’s economy
In recent years Mozambique has earned a reputation for prudent macroeconomic
management backed by remarkable achievements in economic growth. Whilethese achievements are credited to stability, favourable economic policies(reforms), and large foreign investment inflows, there is no denying that
Mozambique’s growth has a strong foreign aid bias and the growth has not yieldedsocial benefits across the spectrum. Several challenges remain. Per capita income
remains low ($300) and a large portion of the population (almost half thepopulation) still lives below the poverty line.

24. Mission highlights
A. Workshop in Nampula
We drove approximately 250 Km of rehabilitated road, from Nampula to Nacala
where the fisrt workshop was held. The road was in relatively good condition.
However there were few access roads and we saw few signs of economic activity
along the road except the vicinity of the port, which suggested little linkage withthe rural economy. At present there are few planned projects that will link up witheconomic activities along the road. At the workshop, the governor of the Nampula
Province delivered a speech to the participants outlining his administration’s viewon the strategic importance of the Nacala Development Corridor to the economic
development of the province.
B. Visit to MOZAL
We visited Mozal, the US$1.3 billion alluminium smelter plant outside Maputo.
Thanks to the rising commodity prices in the world market, the company hasregistered large profits in recent years and is planning to expand its operations in
the country to meet growing demand for aluminium in the global market. The
planned expansion is contingent on additional electrical energy.
The International Finance Corporation (IFC) has identified lack of linkages
between mega-projects (such as Mozal) and local industry as an area to focus on
and has set up a project to finance linkage programs that will train Mozambicancompanies to meet Mozal’s standards. They are working with Mozal, looking attheir value chain to maximize this potential. Creation of more employment inaddition to the current 1,000 local employees on Mozal’s payroll is expected.
In the mean time, in order to extend social benefits to the wider community, Mozal
funds community development programs to the tune of up to US$3 million a year
(there are plans to increase this funding to US$5 million a year). The Mozal
Community Development (MCD) runs several projects that involve building
schools, providing of health care, etc.
C. Consultations with various stakeholders
We visited institutions responsible for formulating and implementing economic3

development strategy. We briefly describe them below and give our assessment ofthe needs and constraints in policy development and inter-agency coordination.

(i)National Directorate of Industry (NDI)
Operating under the Ministry of Trade and Industry (MTI), the National
Directorate of Industry’s role is to formulate and implement industrial policy
and promote growth in the manufactruing sector. It is also responsible for
informing the industrial sector of opportunities arising from trade
agreements. For example, it administers the MTI’s program to exempt inputs
imported for certain domestic industries (garments, chemicals, engineering,food processing) from tariffs.
The NDI has formulated the industrial strategy of Mozambique. This
document (we obtained a soft copy) is a SWOT analysis of the Mozambiqueindustry that presents priority areas for implementation. It comes with anaction plan that details how the strategy will be implemented. The action
plan, being an internal document, was not made available to us.

(ii)

Export Promotion Agency (IPEX)The Export Promotion Agency‘s (IPEX) role is to promote Mozambican
exports to the world. IPEX identifies products with good export potential (byprovince), prepares strategies for each and organizes trade missions totargeted markets overseas. To achieve its mission IPEX works closely withMozambican producers promoting export oriented production and providing
market access information. IPEX actively participates and coordinates intrade policy formulation.

(iii) The Confederation of Business Associations of Mozambique (CTA)
The CTA is a federation of 57 business associations representing more than
three thousand companies from various sectors of Mozambique’s economy.
Its members are also geographically representative including associations
from all provinces. The CTA’s role is to address constraints that its members
experience in Mozambique, and liaise with the government to remove them.
As the ultimate bearer of the effect of policy, the CTA has set up various
mechanisms to engage with the government in order to feed into private
sector related policy formulation. They have permanent working groups that
address sector-specific issues and have annual reviews of progress withsenior officials of ministries relevant to the sectors. This public-private
partnership is further enhanced through the annual conference of the private

4sector in Mozambique. It is not always the case that their recommendations
are taken into account by the government, as was the case with theindustrial strategy, which has just been proposed for approval to parliament.
From our discussions, it was clear that the Mozambique private sector has
considerable insight into the steps needed to reduce costs and to become
more competitive domestically and in foreign markets.
(iv) The Investment Promotion Center of Mozambique (CPI)
Operating under the Ministry of Planning and Development’s jurisdiction, theCPI’s main role is to attract and facilitate domestic and foreign investmentthat will stimulate job creation. It serves as the primary agent for promoting
and facilitating investment in Mozambique. Its functions of administering theexport processing zones (EPZ) have been assigned to a newly createdagency, the GAZEDA to focus on attracting more investment. While thegovernment’s goal of creating several agencies with seemingly overlapping
responsibilities and mandates is to decentralize their activities to improve
effectiveness, more capacity building is needed in terms of coordination atthe institutional level.
Despite its shortcomings, and compared to other developing countries,
Mozambique’s economic development policy structure has several aspects ofplanning right, especially with their bottoms up approach.
D. Business climate assessment: opinions of a Japanese investor
According to a local Japanese investor, claims of improved investment climate
have mixed record on the ground and may be limited to big projects. The interestsof foreign and local SME investors continue to be largely overlooked. Complicatedregulatory procedures, inconsistent applications of laws (an archaic commercial
procedures based on inherited colonial code is still in use with few changes), andjurisdictional overlap among government agencies, not only promote corruption,
but also stifle business start up and expansion and destabilize the commercialenvironment. In particular, labour laws offer unusually generous protection forworkers. For example, there is restriction on period of work (including theprobationary period) before automatically triggering permanent employment
status. These restrictions greatly increase costs and impair labour mobility andthe creation of new jobs.

55. Mega projects
Mega projects at various stages of planning include the following.
(i)Cahora Bassa: Major expansion of hydroelectric power generating capacity
at Cahora Bassa on the Zambezi River. At present the dam generates anominal

capacityof2,000MW,supplying

electricity

fordomestic

consumption (Mozambique: 350MW; Mozal: 900MW), as well as for export
to Zimbabwe and South Africa. The government is now seeking investors toexpand capacity at the Cahora Basa Dam, and for a new 1,600-MWhydroelectric facility on the Zambezi River, south of the Cahora Bassa.
(ii)

Moatize coal fields: Development of the Moatize coal fields in Tete Province(concession to a Brazilian company). Moatize in northwestern Mozambique isconsidered to be the largest unexplored coal deposits in the world. The
project will likely include the development and improvement of mine
facilities, railway line and a power station.

(iii) Zambezi River Bridge: Construction of the Zambezi river bridge at Caia.
(iv) Mpanda Nkua Dam: Construction of a new dam at Mpanda Nkua (1,600MW).
(v)

Temane natural gas fields: Development of the Temane natural gas fieldsouth of Maputo.

(vi) Development of the tourism industry: Mozambique has all the ingredients foran exciting tourist destination. Cultural heritage, natural beauty, various
national parks and game reserves and the spectacular Mozambique coastline.
Wildlife experts report common sightings of elephants on white sandbeaches (an extreme rarity in wildlife parks such as the Masai Mara,Serengeti or Kruger). This tourism development potential would even be
greater if considered regionally. However, development in the sector isconstrained by poor infrastructure, lack of skilled human resource, poor
regional and international marketing, etc.
To become a premier tourist destination in the region, Mozambique would
need to invest heavily in infrastructure, product development, andmarketing. A variety of new investment opportunities have been identified
for prospective private sector investment in Mozambique. The IFC’s South
East Tourism Investment program is supporting development of tourism withregional linkage. It has identified sites and is now marketing these to parties
it knows will be interested especially if the IFC is involved. One such party is
the Dubai World Investment Consortium that is interested to develop the6Bailene Beach Resorts.
6. Development policy formulation
There is a strong desire for economic development at the highest level ofgovernment, as demonstrated by the emphasis on rehabilitation of roads,railways, ports and airport infrastructure, as well as the bulk electricity andtelecommunications infrastructure that is required to underpin economic growthand development. Several planning initiatives limited to specific economic sectors
or regions have proposed important initiatives and strategies, but nocomprehensive economic development plan is compiled for the country as a whole.
The government works with guidelines and action plans targeting specific issues
on 5 years government programs. On a need basis, they set up task forces thatwork in informal ad-hoc consultations to formulate policy “guidelines”. These
guidelines are not detailed documents. They present priority areas, which will beused by various directorates (if approved by the council of economic ministers) toformulate strategies. Various ministries work in conjunction with other related
ministries to formulate significant sector-specific strategies. Policy is notcoordinated through a formal body that oversees various policy formulation
processes.
The concept of economic development planning is important for keeping
development efforts on-track, for drawing attention to outcome, and for drawing
lessons of good practice from accumulated experiences from other countries who
have been there before.
Hence, the needed for a comprehensive economic planning framework that must
identify appropriate industrial activities, incentives for investment, infrastructure
and public service needs, a clear spatial strategy, and be anchored on solid andsustainable community participation to foster a sense of ownership and support ofthe plans, (including environmental protection measures), and be compatible withcore economic activities in each region.
[Elumba Jean Denis Nkongolo]7