Introduction
Despite regional conflict, devastating floods, and fluctuating world prices for key commodities, Mozambique has registered remarkable achievements over the past decade in growth, stabilization, and reform. Yet the country is still one of the poorest
in the world, with more than half of its population living in extreme poverty.
To lift its citizens from poverty, Mozambique must continue to grow rapidly over the next decade. These improvements will necessarily depend on export growth, because the internal market is too small and the purchasing power of Mozambican consumers too low to support the required growth rate through domestic demand alone. Furthermore, even in countries with large domestic markets, like China, export activities provide a strong impetus to growth by attracting investment, stimulating innovation, and enhancing efficiency. The challenge, then, is to develop a strategy that will help Mozambique achieve rapid export growth while ensuring that such growth provides economic opportunities and higher incomes for the poor.
The position of this study is that international trade must be an integral part of Mozambique’s strategy to sustain rapid growth and reduce poverty. The public and private sectors must address the many barriers to trade and investment in a comprehensive and collaborative manner. This process will enable domestic entrepreneurs and foreign investors to take full advantage of opportunities to increase exports and create jobs on a broad base, which is essential for continued poverty reduction. Efforts to improve the climate for doing business in Mozambique will also help domestic firms improve efficiency and compete more effectively against import competition. Addressing these constraints implies a broad but essential agenda, one that can only be accomplished with full endorsement at high political levels, as well as effective intergovernmental coordination, public–private partnership, and targeted donor-funded technical assistance.
For Mozambique, developing export capacity requires improvements in three areas that will have economy-wide effects: (1) in the business-enabling environment, to stimulate domestic and foreign investment in labor-intensive sectors of the economy,
(2) in the transportation infrastructure and in border clearance procedures, to reduce the high transaction costs that currently render Mozambican products uncompetitive in global markets1, and (3) in Mozambique’s trade and investment policies, trade institutions, technical and analytic skill levels, and policy coordination processes, to address impediments to exports in a coordinated and comprehensive fashion.
Although this is an ambitious agenda, resource constraints must be kept squarely in mind in evaluating reform measures and setting priorities. Even with all of the funding available from donors and multilateral financial institutions, Mozambique
faces very serious limitations in fiscal resources and administrative capacity for implementing public sector programs. These constraints underscore the importance of streamlining government operations, reducing inessential interventions, and harnessing private sector capital and initiative.
This study presents an assessment of Mozambique’s trade integration needs and the relationship of those needs to poverty reduction goals in three volumes. Volume I presents a summary with recommendations and an action item matrix. Volume II,
the main report, examines cross-cutting themes and issues and sector-specific trade opportunities and constraints. Volume III contains supporting materials: detailed crop subsector analyses, and the results of a trade transport facilitation audit
conducted by the World Bank.
The main report begins with a broad overview of the economy in Chapter 1. Chapter 2 profiles the poverty situation in Mozambique, as well as trade and poverty linkages. Chapter 3 describes the regulatory environment, sometimes referred to as
the business-enabling environment. Chapter 4 focuses on trade facilitation, especially issues related to Customs, transport, and logistics. Chapter 5 discusses Mozambique’s opportunities for increasing access to foreign markets through trading arrangements—multilateral, regional, and preferential. Chapter 6 describes the institutions and processes involved in trade and investment policy, negotiations, and public–private coordination in Mozambique. Chapter 7 examines trade and investment policy per se, particularly insofar as current policies may thwart export competitiveness or mar the country’s investment environment. Chapter 8 introduces the key elements of a poverty-focused trade strategy in Mozambique. And Chapter 9 discusses mechanisms to implement a national trade strategy that seeks to provide greater opportunities to Mozambique’s poor, while cushioning disruptive short-term effects of economic liberalization that will provide for improved competitiveness and
growth opportunities.
In chapters 10-13 of the main report, we profile opportunities for and challenges to the expansion of Mozambican exports in sectors that are key to the Mozambican economy and to the impoverished in particular: agriculture, fishing, labor-intensive
manufacturing, and tourism. Persons interviewed for this report are listed in Appendix A and sources consulted are listed in Appendix B.
Recommendations for capitalizing on Mozambique’s inherent strengths, for addressing constraints, and for pursuing opportunities are highlighted in the summary and recommendations section and in the matrix of technical assistance action, and elaborated throughout the report.
Footnote:
- The study focuses on international trade because that is the primary objective of the Integrated Framework
process. Measures aimed at reducing transactions costs and enhancing efficiency in domestic trade are also vital for successful development. One reason, among many others, is that high domestic trading costs are themselves a major barrier to broad-based expansion of international trade.
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