Mozambique's Private Sector Raises its Voice - GRM

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SENSITIVE

E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique's Private Sector Raises its Voice - GRM
is Attentive


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Sensitive But Unclassified - Handle Accordingly


1. (U) Summary: On May 3-5 Mozambique's national business
association, CTA (Confederacao das Associacoes Economicas de
Mocambique) held its ninth annual conference. Entitled "For
a Better Business Environment: Opportunities in the Global
Market," the conference focused on the effects of
globalization and spurring economic growth at the district
level. In a sometimes lively forum, two key contentious
issues emerged: whether land could be used as collateral and
whether the government ought to fund a development bank.
The private sector and government representatives disagreed
over the land question, but most favored a development bank.
The gathering was not designed to be decisive, rather an
opportunity to hear advocates for range of policies of
central interest to the private sector and to underscore
some the key challenges businesses face. The GRM was
attentive. In this sense CTA's conference was a success.
End summary.


2. (U) On May 3-5 Mozambique's national business
association, CTA (Confederacao das Associacoes Economicas de
Mocambique) met in Maputo for its ninth annual conference.
(Note: The USG has provided significant financial and
technical support to both CTA and the conference for the
past eight years. End note.) Entitled "For a Better
Business Environment: Opportunities in the Global Market,"
the conference focused on the effects of globalization and
spurring economic growth at the district level. Keynote
speakers for the conference, Dr. Stephen Radelet and Dr.
Frank Flatter, both respected market economists, were
identified and funded through USAID.


3. (U) President Guebuza, the Mayor of Maputo, the Minister
of Industry and Commerce Antonio Fernando, and the President
of CTA all addressed the conference during the opening
session. There was significant, high-level GRM involvement
throughout the three days of the conference, including two
speeches by the Prime Minister, speeches by the Ministers
for Industry and Commerce, Agriculture, Labor, Justice,
Tourism, Transportation and Communication, and Public Works
and speeches by the Vice-Ministers for Finance and for
Planning and Development. In addition to the many
presentations given by the various CTA sector interest
groups, there were presentations by senior business leaders
such as the Chairman of the Board of BCI Fomento Bank and
the head of Dunavant Mozambique, by the USAID/Mozambique
Mission Director, by the founder of a local business school,
and by a District Administrator. A session exploring the
role of women in business showcased a panel including the
First Lady, Mrs. Maria da Luz Guebuza. A closing summary of
the main issues raised by the conference was provided by the
Executive Director of CTA.


GRM Sees Land Tenure Regime No Impediment to Development
-------------- --------------


4. (SBU) The President's and other high-level speeches all
favored support for private sector development and an
improved business environment. However in one critical
area, land use rights, there was considerable discord
between the private sector and the GRM. The private sector
favors the simplification of the cumbersome land use
transfer processes and legal requirements, and the
strengthening of the security of land use rights/tenure.
The GRM, on the contrary, asserts that the existing system
is perfectly sufficient and does not negatively affect
private sector growth or investment. In his speech,
President Guebuza, indicated that he did not know of a
single instance where private sector investment was hindered
by current land policies, citing - somewhat inappropriately,
in our view - the success of mega-projects such as the giant
aluminum mill, MOZAL. (Note: Under the Mozambican
constitution all land is owned by the Government.
Individuals are given long-term leases for specific uses and
applications for lease rights are approved on a case-by-case
basis. The sale of lease rights is subject to administrative
approval by government. End note.)

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5. (SBU) Comment: Land increasingly has become a contentious
topic, as the private sector and some donors press that land
use rights be made sufficiently transparent so that land can
be used as collateral. The GRM, on the other hand, is
cautious about taking this step, which some believe will
lead to privatizing land - something that for political
reasons many, including members of civil society, in this
former socialist country oppose. Their oft stated concern
is that were land to be privatized, many poor farmers would
be bought out and forced to migrate to the cities, where
they would have considerable difficulty finding work. Some
observers, however, cynically claim that many of the
powerful in Mozambique already have obtained large
concessions, and prefer the rather murky status quo, which
favors the well-connected. End comment.

Development Bank
--------------


6. (U) Another contentious issue repeatedly raised by both
GRM officials and private sector participants was the need
for a Mozambican development bank. (Note: For most in
attendance, such a bank would be a agricultural development
bank, although some advocated credit for industry, too. End
note.) Nearly all of the GRM officials favored establishing
one. Of the GRM officials who spoke at the conference, only
the Vice Minister of Finance discussed the need for
proceeding carefully and cautioned that without the
necessary groundwork - proper land registries, clear titles,
bankruptcies provisions, etc - such a bank would be unable
to properly function. The two keynote speakers had also
promoted the idea of proceeding cautiously as development
banks in most cases have not been successful. Furthermore,
Dr. Radelet presented the economic argument against
development banks, stating that any concessional lending
provided by the bank would have to be paid for by hiking
interest rates elsewhere, if the government did not want to
increase the rate of inflation. The majority of the private
sector, with the notable exception of the Chairman of the
Board of BCI Fomento Bank, was extremely supportive of the
concept of a development bank as many persons were able to
obtain "free money" under previous development bank schemes.


7. (U) The audience reserved most of its applause for
requests for special favors or subsidies (the development
bank was only the largest of several angles) from the
government. Fisheries asked for fuel subsidies, remoter
regions asked to pay the same price for imported fuel as the
port cities, etc.. One intervention recommended that Dr.
Stephen Radelet, the keynote speaker, who had dared suggest
that development banks always cost money and almost never
work, should be strangled. The Prime Minister, in her
closing, defended the development bank, but also said that
in Mozambique, it is considered impolite to strangle honored
guests.


8. (U) Members of the private sector expressed general
satisfaction with the conference, although a recurring
complaint was lack of time for debates. Previous
conferences allowed more time for debates and discussions
with the various Ministers, by holding simultaneous sessions
and making fewer formal presentations.

Comment
--------------


9. (U) Despite a good deal of support from the floor for
policies that would cause more harm than good, the
conclusion was a sober focus on four major issues: fiscal
policy; financial services; red tape; and transaction costs.
CTA showed itself to be capable of responsible policy
analysis and President Guebuza clearly welcomes this.
Improving the business environment was the focus of this
conference, and President Guebuza and other GRM officials
are clearly supportive of this endeavor. There are also
indications that he, unlike his predecessor, is willing to
make the bureaucracy yield to some reasonable reforms.


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10. (U) It is significant that the private sector is able to
raise its voice and air complaints to government officials,
and even more significant that government officials take
time to listen and respond publicly. While the exchange may
not always be exactly what we want to hear, the exchange
itself is critical to the continuing advancement of
Mozambique's democracy and economy.

La Lime