MOZAMBIQUE AS PILOT COUNTRY FOR EVIAN

UNCLAS MAPUTO 000148

SIPDIS
AF/S AND AF/EPS
E FOR ANNE PENCE, EB/IFD/OIA FOR MARTHA KELLEY OR TIM HAUSER
INL/C FOR DAVID LUNA OR JOHN BRANDOLINO
YAOUNDE FOR MALABO JIM PANOS
BRUSSELS FOR USEU
E.O. 12958: N/A
TAGS: EAID ECON EINV ETRD PGOV MZ KCOR
SUBJECT: MOZAMBIQUE AS PILOT COUNTRY FOR EVIAN
ANTICORRUPTION/TRANSPARENCY INITIATIVE

REF: A. A) SECSTATE 16100

B. B) MAPUTO 83


1. Post welcomes the opportunity for consideration as a
candidate pilot country under the Evian
Anti-corruption/Transparency initiative and submits results
of initial internal discussions below. The GRM has
demonstrated a commitment to combating corruption and has
worked closely with the IMF and the donor community to
improve transparency in public financial management and
government budgeting and procurement. Inclusion as a
non-extractive pilot country would prove a useful and welcome
augmentation of GRM efforts already getting underway. The
GRM has been responsive to donors and IFIs to concentrate on
these issues and understands their importance for
consideration under MCA and NEPAD criteria, as well as to
Mozambique's continued political and economic development.
Direct budget support constitutes over 50 percent of the GRM
budget. On the corruption front, some substantive first
steps have been taken (reftel B),including the formation of
the Attorney General's Anti-Corruption Unit in November 2002,
mainly with USG support. USAID mission has followed closely
the GRM-IMF strategy for improved financial accountability.


2. The GRM Technical Unit for the Reform of Public Financial
Management (UTRAFE) is now in the second year of
implementation of its action and budget plan, named SISTAFE
(Public Financial Administration System). UTRAFE and the
Technical Unit for Public Sector Reform (UTRESP) are integral
elements of the GRM's Strategic Plan for the Reduction of
Absolute Poverty (PARPA). PARPA is the centerpiece of the
GRM government budget and includes elements aimed at raising
health and education spending above the levels dictated by
MCA criteria. Awareness is high among GRM officials of the
adverse effects on foreign investment caused by excessive
bureaucracy and the corruption climate. The Finance Ministry
and UTRAFE are moving from intent to implementation.


3. The overall objectives of SISTAFE, as established in
October 2002, are as follows: 1) to establish and harmonize
rules and procedures for programming, execution, control, and
evaluation of public financial resources; 2) to develop
subsystems that produce timely and reliable information about
the budget execution and asset management in all state
organs; 3) to establish, implement and maintain an accounting
system controlling budget execution and asset acquisition;
and 4) to establish, implement, and maintain an effective and
internationally accepted internal control and audit system.
The tender for roll-out and operation of all systems is
scheduled for April 2004 and implementation of the asset
management system is expected in the second half of the year,
with general roll-out to all government sectors and
municipalities in 2005, and state enterprises in 2006.


4. As part of the USAID six-year strategy, Democracy and
Governance efforts will include a focus on four to five
municipalities to provide USG assistance in increasing
capacity for good governance, transparency, and sound
financial management, with the target of supporting GRM
decentralization efforts. While we recognize more details of
the Pilot Country Initiative have yet to be developed, we
already see a potential for a pilot program that could work
in a few key municipalities to help Mozambique develop the
best implementation mechanism for SISTAFE and also complement
our six-year development strategy.


5. Inclusion of Mozambique as an Evian pilot country would
build upon assistance already provided or planned, upon
pressure and encouragement from other donors, and upon the
SISTAFE program with the IMF.
LA LIME