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Mozambique: Conference on Economic Challenges and Opportunities Ends with Recommendations on the Way Forward

Maputo -- March 31, 2010 -- The Government of Mozambique, in collaboration with the World Bank (WB) and the International Monetary Fund (IMF), organized a week-long high level policy conference (March 22-25) in Namaacha-Maputo to discuss Mozambique’s medium-term economic policy priorities and structural reforms that could help preserve macroeconomic stability, raise the economy’s growth potential, improve competitiveness, manage new risks, and identify options for financing the expansion of the country’s public investment program.  The seminar’s conclusions were presented in a ½ day special meeting with Cabinet Ministers, which was chaired by H.E the Prime Minister, Mr. Aires Ali. 


In addition to the Government participation throughout, especially at the level of senior officials of key economic ministries and state agencies, the meeting was honored by the presence of savvy insiders from the business communities, but also members of prominent think tanks, media groups, civil society, and academia. 
  
We definitely need more of these”, wrapped up former Prime Minister, Mr. Mário Machungo, currently chairperson of the country largest private bank, at the end of a session he helped moderate. “I hope we can have another discussion as this on agribusiness given its strategic importance for Mozambique”, said former Minister of Finance, Mr. Magid Osman, and now an influential businessman and opinion leader, who participated as a discussant in a session on the need to maximize the benefits of public investments and concessions.

The Mozambican state is moving from a state-enabler to a state-entrepreneur", said Prof. Castel-Branco, a London trained economist and prominent opinion leader. He also added that in order to make such a development model successful, the Government has to tackle head-on the issue of capacity, and endeavor to make sure the state is endowed with the right skills, sound strategies, and greater coordination. Other prominent members of the civil society including Mr. Fernando Lima, founder of one of the oldest independent media groups in the country, emphasized the importance of local ownership of development processes by Mozambicans to ensure sustainability. "To make these investments sustainable, we need to zero in on access to information as a starting point", said Mr. Lima. “How can one talk of maximizing the benefits of public investments, concessions, and mega-projects if the contracts of those investments are kept away from the public eyes" seconded Mr. Tomás Selemane, Coordinator of Extractive Industries Program for a pro-transparency advocacy group.

Mozambique has registered over the past 20 years impressive growth rates ranging from 7 to 8 percent”, said H. E Minister of Finance, Mr. Manuel Chang in his keynote address. “In such an environment of uncertainty characterized by greater scarcity of resources and increased competition, our country is compelled to examine the past and rethink the future; that’s what we are here for.”
 
Mr. Chang also added that he expects concrete ideas that can help the Government rethink the future, including specific recommendations on the kind of financial architectures that can help the country cope with its financial needs for its infrastructure programs, as well as recommendations on the key and pressing issues to be tackled on the business environment front to boost competitiveness of the country’s economy.

The conference, the first of its kind,  included presentations from Government officials on key priorities to accelerate economic growth and reduce poverty in the coming five years; perspectives on debt sustainability and fiscal policies; and on Government’s perspectives in monetary policy by the central bank. Most of the presentations were accompanied by open and candid debates by distinguished panelists and discussants. 

Main themes and conclusions 

The discussions at the conference emphasized that Mozambique has an enormous potential for rapid economic growth, and that policy reforms need to focus on unleashing such potential.  In this context, the Government’s desire to identify additional resources to finance an ambitious investment program is welcome and appropriate, but the success of this development model will depend on an incremental approach with prudent macroeconomic management that identifies the right public investments. 

The macroeconomic challenges associated with managing access to significant external resource are significant, and require preparation.  The experience from other countries suggests that accessing non-concessional borrowing entails substantial risks and, therefore, a gradual and prudent approach may be warranted. 

Participants at the conference also emphasized the importance of continuing to invest in those infrastructures with potential to leverage the country's potential as a whole.  Drawing on concrete examples from countries at a similar development stage as Mozambique, it was highlighted that successful investments are determined by a careful planning systems that enable for a selection of those key undertakings, taking into consideration the economic and financial conditions of the country.  In this context, the need to strengthen the legal and regulatory framework for public investments, concessions and PPPs was also noted. 

In addition, it was agreed that additional financing for infrastructure investments is only half the problem, and needs to be complemented by renewed efforts to improve the business environment, allowing for greater flexibility in land and labor markets, and improving the logistics for trade.  All of these ingredients are needed to unleash private sector initiative, and thereby ensure that the already existing infrastructure, as well as the newly planned investments, can be fully utilized to generate economic activity and create wealth.  Failure to ‘accelerate the pace’ in the broader reform agenda, would undermine the financial returns from the individual infrastructure investment projects and risk compromising the debt sustainability for the entire country.  Finally, the Bank and IMF expressed their desire to work with the Government to help realize the Government vision to unleash productive activities, and accelerate economic growth and poverty reduction, through increased infrastructure investments and better environment for private sector activity.

Building on experiences from other countries 

The conference drew on the experience of other low income countries and emerging market economies, and counted with thoughtful insights from Bank and IMF regional high level technical staff on a variety of themes.  The opening session discussed an assessment of the country’s recent growth experience, the challenges in the business environment, and the opportunities from trade and regional integration to foster job creation and reshape growth.  The afternoon session examined the macroeconomic policy challenges, including an analysis of debt sustainability taking into account the emerging financing needs for the ambitious 5-year infrastructure investments program, as well as a discussion of the risks from accessing non-concessional borrowing.  A whole morning session of the following day was devoted to discuss the need to maximize the benefits of public investments, PPPs and concessions.

In addition to those sessions open to non-Government officials, the conference was followed by meetings reserved to Government officials, which aimed at discussing technical and operational issues, including pros and cons of alternative non-traditional sources of financing, thus fulfilling the objective of transferring know-how, knowledge, and expertise, at a crucial juncture of the country’s development process when the Government envisages embarking on a new generation of reforms and strategies to finance its infrastructure needs.

Following an overview presentation of recent trends and prospects of different types of financial flows into developing countries, which served to set the stage for the presentations and discussions that followed, the sessions reserved for Government officials included technical sessions on how to access bond markets, including an overview of recent experiences from  Ghana, Gabon, Senegal, South Africa, and Vietnam, as well as a session on  how to facilitate private sector financing for infrastructure investments through World Bank guarantee instruments, including a look at the experience of the IBRD partial risk guarantee to the SASOL natural gas project in Mozambique and the Botswana’s Morapole project.  Other sessions discussed the possible role of corporate bond markets in economic development and the financing of infrastructure priorities, with case studies from Kenya and Nigeria.  The final session discussed the role of Public Private Partnerships in financing infrastructure, including a case study on the experience of the PPP unit in South Africa.

Contributed by Rafael Saute (EXT) with inputs from Antonio Nucifora (Sr. Economist, PREM) and Felix Fisher (IMF Resident Representative in Mozambique). 

 




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