INVESTMENT CLIMATE STATEMENT APPENDIX FOR

UNCLAS SECTION 01 OF 03 MAPUTO 001053

SIPDIS
STATE FOR EB/IFA/OIA - ABRYAN, AF/S - KEES DAVISON
PLEASE PASS USTR
COMMERCE FOR AMANDA HILIGAS
LABOR FOR ILAB - PATRICK WHITE, BOB YOUNG
JOHANNESBURG FOR REGIONAL LABOR OFFICER
E.O. 12958: N/A
TAGS: EINV EFIN ELAB KTDB PGOV MZ OPIC
SUBJECT: INVESTMENT CLIMATE STATEMENT APPENDIX FOR
MOZAMBIQUE - 2004

REF: STATE 141379


1. Per reftel, post submits Investment Climate Statement
(ICS) appendix below:
MOZAMBIQUE: July 2004 Appendix to 2003 Investment
Climate Statement
This appendix serves as an update to the 2003 Investment
Climate Statement for Mozambique. It has been provided
to assist investors in the interim period resulting from
the U.S. Government's decision to begin publishing the
Country Commercial Guide (of which the Investment Climate
Statement is a chapter) on a calendar year basis, in
January instead of August.
The United States Government has reviewed the 2003
Investment Climate Statement for Mozambique, and has noted
the following changes that have occurred since its
publication. In most circumstances, if a portion of the
2003 Investment Climate Statement has not been modified in
this appendix, it is because the U.S. Government is
satisfied that it continues to accurately reflect the
state of affairs in Mozambique as of July 2004.
Openness to Foreign Investment:
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Several indicators were published in 2004 that shed light on
Mozambique's process of business registration. The "Doing
Business in 2004" Report, by the World Bank, identified
Mozambique as one of the most difficult countries for
business establishment, citing an average of 14 steps and 153
days to register a business.
Privatization has slowed down and impediments remain in the
privatization of parastatals, largely because these deals are
politically sensitive. The GRM has indicated that it is
searching for private investors in the case of Linheas Aereas
de Mocambique (LAM),Mozambique Telecommunications (TDM),and
Mozambique Electricity (EDM). To date, this has been a spoken
initiative with no real action to solicit the interest of
private firms and move forward.
Conversion and Transfer Policies:
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No significant changes since 2003.
?
Expropriation and Compensation:
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No significant changes since 2003.
?
Disputes Settlement:
--------------
The current commercial code, from 1888, is under revision.
The National Assembly did not pass newly proposed legislation
and the Code rests with the Government for refinement. It is
anticipated the National Assembly will vote on the Code again
in the Extraordinary Session in October 2004.
Two centers for commercial arbitration, one in Maputo (CACM)
and a second in Nampula, have opened and are operating
successfully. These facilities offer arbitration for
complaints between companies, and do not deal directly with
labor issues.
?
Performance Requirements and Incentives:
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The GRM identifies "Rapid Development Zones" and grants
special fiscal, labor, and immigration arrangements for
companies operating in these zones. Zones, as identified by
the Investment Promotion Center (CPI) in 2004, include:
Niassa Province, Nacala District, Ilha de Mocambique
(Mozambique Island),Ibo Island, and the Zambezi River Valley
(encompassing parts of Tete, Sofala, and Manica Provinces).
Investments in these zones are exempt from import duties on
certain goods, exemption from the real property transfer tax,
and an investment tax credit equal to 20% of the total
investment (with a right to carry forward for five years).
The GRM continues to support development of "industrial free
zones" (export processing zones). Please see "Foreign Trade
Zones/Free Ports" heading below.
?
Right to Private Ownership and Establishment:
--------------
No significant changes since 2003.
?
Protection of Property Rights:
--------------
Intellectual property right infringement continues to be a
relatively insignificant problem in Mozambique due to the
small size of the domestic market. There is, however, an
increasing number of pirated copies of audio, videotapes, and
DVDs and other goods (sunglasses, etc) sold in the informal
market.
Transparency of the Regulatory System:
--------------
No significant changes since 2003.
?
Efficient Capital Markets and Portfolio Investment:
-------------- --------------
No significant changes since 2003.
?
Political Violence:
--------------
Opposition party members, both from RENAMO and small
independent parties, complained of intimidation prior to and
during the 2003 municipal elections, but there were no
reported cases of political violence. In speaking with
political party leaders prior to the 2004 presidential
elections, no political violence is expected. Many opposition
parties and FRELIMO recently subscribed to an electoral code
of conduct to be observed during the 2004 electoral process.
Although not legally binding, the code commits the signing
parties to avoiding acts of violence during the period.
?
Corruption:
--------------
The GRM launched a new Anti-Corruption Unit in the Office of
the Attorney General that is charged with investigating and
prosecuting corruption-related offenses. The National
Assembly passed a new anti-corruption law in 2004 that
updates previously antiquated legislation. Civil society has
become more vocal on corrpution-related issues and is
demanding stronger government action. The anti-corruption
NGO, Etica Mocambique, was formed to work on ameloriating
this problem. Recently, Etica has started a television and
print media sensitization program to help citizens identify
and protect themselves against cases of corruption.
?
Bilateral Investment Agreements:
--------------
The Bilateral Investment Treaty (BIT) between Mozambique and
the United States is still awaiting Mozambican ratification
in the National Assembly. The UK completed their BIT with
Mozambique in March 2004.
OPIC and Other Investment Insurance Programs:
--------------
No significant changes since 2003.
?
Labor:
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The estimated work force in Mozambique numbers 9.2 million.
In 2004, the GRM increased the country's statutory minimum
wage by slightly more than the 2003 inflation rate of 13%.
The minimum wage for industry, services, and the civil
service rose by 14%, from $41 to $47 per month. The minimum
wage for agricultural workers rose by 15%, from $29 to $34
per month. Although the hike for agricultural workers was
higher, there is still a significant gap between wages for
different groups. Nationwide literacy levels are estimated at
48% with municipal areas accounting for the majority of
literate adults.
Labor unions, created during the socialist years, are gaining
strength and asserting greater independence from the ruling
party, FRELIMO. Total membership among Mozambique's fourteen
unions is close to 200,000. With respect to revision of the
labor law in 2004-05, labor unions are exerting significant
pressure on the GRM to keep many of the law's extremely
pro-worker provisions.
?
Foreign Trade Zones/Free Ports:
--------------
The two essential requirements for Industrial Free Zone
status are: job creation for Mozambican nationals and the
exportation of at least 85% of annual production. Industrial
Free Zone Developers enjoy an exemption from customs duties,
VAT, and Specific Consumption Tax on the importation of
construction materials, machinery, equipment, accessories,
accompanying spare parts, and other goods destined for the
establishment of the Industrial Free Zone. Mozambique's big
commercial success stories, such as MOZAL and SASOL, operate
in industrial free zones.
LA LIME