Competition Policy And Private Sector Development In Mozambique

Presentation By

Alberto Bila

UEM - Faculty of Economicsand

ADECOM

Mauritus 29-30 of March 2007

IntroductionMozambique environment

- Peace and Macro-stability

- Growth average – 8%

- GDP per-capita +/- 285USD

- Population 19 million

- GDP = 5.5 billion USD

- =-

Mozambique environment

- Agriculture – 25% of GDP

- Industry – 35% 1%

- Services – 40% 5%

- FDI projects improved external trade balance

Economic Policy Context

1. Macro-economic reform policy reform

- ”Economic reabilitation Program” 1987

- Raise production levels

- Reduce financial imbalances

- Create a basis for growth

Economic Policy Context

- Fiscal Adjustments

- Devaluation of the currency

- Agriculture – Government controled prices of few items (sugar, bread, fuel and medicine)

- Crips rose

2. Domestic and external trade policy

Set out objectives Rehabilitation and expancive of the commercial out

work Stabilishmentof trade systems ( including incentives) Creation favourable environment for private sector

development Revision of commercial code and trade laws Development of human resourses

Competition Policy Scenario in Mozambique

Need for competition policy: - 43% consumers affected - Effectiveness of existing regulation - Competition law to cover all enterprises

3. Investment climate and business incentives

Investment law is aimed at attracting local and foreign investors

Exemption from customs

Tax incentives (ten years maximum)

Industrial free zones (IFZs)

4. Industrial Policy

•Aims- Developing industry and making better use of natural

resources- -increasing the value added to products- - Diversity national industry- - Subsisting imports of intermediary goods

- •Indicates the role:- - state is to regulate and supervise the development of

industry- - private sector is to invest- - informal sector in generating employment and

income.

5. Poverty Reduction Action Plan (PARPA)

Overall objects

- reduce living in poverty from 70% 1997 to below 50% by 2010

- economic growth

- public sector investment in infrastructure and institutional reform.

Environment for private sector development

• GOOD• - creating a stable macroeconomic environment • - liberalizing controls on foreign exchange

transictions;• - liberalizing prices licensing and other controls • (domestic markets and external trade)• - rationalising tax and tariff structure• - liberalizing investiment laws• - actively promote foreign investment and exports.

Private sector dev. In Mozambique

••SMES in MozambiqueSMES in Mozambique

- Little priv. Sector development - SMEs supper the most from adverse economic conditions and

little conducive business climate

•The failed potencial of privatization for private sector development

- under-developed network utilities - Financial policy envirnment lilted towards foreign investors - stock-market in its infancy

Private sector dev. In Mozambique

• The costs of doing business in Mozambique - Direct costs such as labocer are not high

productivity

Unit labour costs

Mozambique 11-12 +/- 0.25%

Africa 14 0.16%

China 18 0,23%

Private sector dev. In Mozambique

- Indirect costs account for 20-30% of costs

Energy: 1/3 of total, transport telecom, security - Limited acess to finance -Limited market acess

Insufficient and Deficient Infrastructure development

•Obstacles

- Effect of lack and disruption in energy supply

-high transport costs

- Major improvment: TELECOM

Insufficient and Deficient Infrastructure development

•Access to infrastuture: Energy botleneck and exclusion of rural population .

% of total of pop.

% rural % urban

Electricity 25 10 65

water 54 51 80

Insufficient and Deficient Infrastructure development

• Electrification rate – 20%

• TELECOM: impressive progress

- fixed 3 per 100 inhabitants

- mobile 9 per 100 inhabitants

A limited access to finance

•Bank credit to private sector in 2005 (in % GDP) 3%

•Adopting axisting lending institutions of tools - More towards on integral system for financing

SMEs

Limited market integration

• Trade Issues

- limited intra-regional Trade

- limited insertion in world economy ( nom trade-barriers)

- Emerging markets ( China)

A predatory public sector

•Taxation, corruption and inefficient regulation - doing business paying tax rabk/ 17580

•Not social trouble

Key messages

•Rethinking the role of state in Mozambique

- Limiting interface with private sector activity last increase dialogue

- Strengthening institutional capacities ( regulators framework and public sector management