Mozambique:Political Economy

Nick DubazNaval Postgraduate School

Monterey, California

Agenda

1.Overview

2.Data•Macro•Trade

3.Analysis •Poverty•Agriculture•FDI/China

4.Prescriptions

5.Assessment

6.Questions

Mozambique Overview

Population:

27.1 million (13th) ↑ 2.44% (Td = 26)

GDP:

$15.63 billion (USD) (112/189)

GDP (PPP) per Capita:

$1,105 (179/185)

History•Portuguese colony (1498-1975)•Civil war from 1981 to 1992

• 1 million dead; 1/3 fled homes

•Transition from Communist system•1987 - move towards markets

•One of world’s fastest growing economies (4th)

Comparative Data

GDP Growth:

GDP per Capita (PPP):

GDP:

Macroeconomic Stability

Imports and Exports

"Mozambique treemap" by R Haussmann, Cesar Hidalgo, et. al. - Electronic Complexity Observatory, MIT Media Lab and the Center for International Development at Harvard University. http://atlas.media.mit.edu. Licensed under CC BY-SA 3.0 via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Mozambique_treemap.png#/media/File:Mozambique_treemap.png

Poverty

Poverty Statistics: • 70% live on less than $2 a day• Declined 22% from 1997 – 2003

• Decline has slowed since

Human Development:• Mozambique’s 2013 HDI is 0.393

• 184/187 countries• below the average of 0.493 for low

human development group• below the average of 0.502 for countries

in Sub-Saharan Africa

Inequality:• Does well regionally, but getting worse

• The poorest 60% receive 30% of the country’s income

• Richest 10% had over 36%• Inequality concentrated in cities

Agriculture & Anti-Poverty

State of Agriculture:

• Strong potential • 36 million hectares of arable land• network of 60 rivers• wide diversity of soil types

• Not contributing to rural development and poverty reduction

• 90% of cultivated land is subsistence level• outdated techniques, low yields

ProSAVANA:

• Brazilian-Japanese plan to introduce large-scale farming of soybeans in Nacala corridor• Value chains & diversification

• 35 million hectares (size of North Carolina)• Heavily criticized as a land grab• Reality -

• Couldn’t meet investor expectations• Domestic politics; poor public relations

FDI

Investment Incentives• New law in 2011• Incentives offered

Megaprojects:• Accounted for most FDI

• 4% of GDP growth• Dams, Mining & Gas• Crowding smaller

investments

China

Bilateral Trade:• Doubled from 2013 to 2014

• $1.64 billion to $2.94 billion• Just $70 million in 2004• Fueled by coal and NG

Infrastructure Development: • 26 infrastructure projects and 17 loans

underway• 1/3 of all roads constructed by China• 50 new stadiums

FDI:• 60 new Chinese companies established

presence in 2014

Economic Challenges/Opportunities

Coal and other extractive industries:• Large investments coming online• Global slowdown in coal; low oil costs• Biofuel potential

External Debt Levels:• Increasing due to NG investment• Vulnerable to global demand

Business Environment:• Poor overall; reforms underway• High corruption; improving• Poor property rights protection

• No private land ownership

PrescriptionsDiversification:• Risks from coal and natural gas• Agriculture investment

• Different model from ProSAVANA

Regulatory Reform: • Incentives for small/medium business• Corruption• Land and property rights

Macroeconomic Stability: • Transition to resource economy• Balance of payments

Inclusive Growth:• Current trends risk future conflict

Political Economy AssessmentAid State:• Declining aid contribution to budget

• 2014: 33.5%; 2010: 51.4%

Rentier Society:• Oil and gas boom; unequal distribution• “Megaprojects” not reducing poverty

HIV/AIDS/Malaria: • Public health spending lagging growth• HIV and malaria increasing despite

programs to combat – 8th globally

Food Security:• Food security investment is severely

lacking – disasters common• Paradox of chronic child malnutrition

despite growth – 43% stunted

14

Questions?