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PREFACE Since the end of the civil war, Mozambique has seen a high growth rate of 7% to 8% annually. On the other hand, GDP per capita is still at a low level among developing countries. The government announced the importance it places on economic development to achieve poverty alleviation and to resolve the development gap between southern and northern regions of the country in the Poverty Reduction Strategy Paper (PARPA II). In the meantime, as neighboring countries depend on Mozambique for access to the ocean, it is placed in quite an important position geographically. Natural resources have great potential for development, and several big investments have been introduced in this field. From the viewpoint of domestic industries, there exists much potential in agriculture, tourism, and other sectors. Despite the potential, however, industries—especially small and medium-sized enterprises (SMEs), which will be the driving force of the economy in the long term—have faced constraints, such as in terms of management skills, finance, and human resources. In line with these conditions, Japan International Cooperation Agency (JICA) planned and conducted this study in order to consider future cooperation in economic development. It would be gratifying if the results of this study are utilized effectively to produce a concrete understanding of potential cooperative ventures. March 2008 Hiroyuki ARAI Director General Economic Development Department Japan International Cooperation Agency TABLE OF CONTENTS Chapter 1: Outline of the Study ............................................................................................................... 1 1-1 Background and Purpose of the Study.............................................................................................................1 1-2 Members ..........................................................................................................................................................2 1-3 Schedule...........................................................................................................................................................2 Chapter 2: Summary of the Study ........................................................................................................... 3 2-1 Industrial Development in Mozambique..........................................................................................................3 2-1-1 Structure of industrial promotion policy..................................................................................................3 2-1-2 The Japanese government’s assistance policy .........................................................................................3 2-2 Development in Economic Corridors ..............................................................................................................4 2-3 Potential for Technical Assistance from Japan.................................................................................................5 2-4 The Direction of Future Cooperation...............................................................................................................6 2-4-1 Strengthening the processing industry.....................................................................................................8 2-4-2 Promotion of tourism...............................................................................................................................9 2-4-3 Promotion of mining..............................................................................................................................10 2-4-4 Others ....................................................................................................................................................10 Chapter 3: General Characteristics of Industry in Mozambique....................................................... 13 3-1 Economy, Trade .............................................................................................................................................13 3-1-1 Economic conditions .............................................................................................................................13 3-2 Structure and Characteristics of Industry.......................................................................................................19 3-2-1 Characteristics by sector........................................................................................................................19 3-2-2 Current conditions of micro, small, and medium enterprises ................................................................20 3-3 Problems in Industrial Development .............................................................................................................21 Chapter 4: The Government’s Industrial Promotion Policy ............................................................... 23 4-1 Current Policy, Laws, and Regulations for Industrial Promotion ..................................................................23 4-1-1 Medium-term development policy framework......................................................................................23 4-1-2 Industrial Policy and Small and Medium Enterprise Policy..................................................................30 4-1-3 Related laws and regulations .................................................................................................................41 4-2 Industry-related Public and Regional Institutions and Their Roles................................................................43 4-2-1 Governmental institutions .....................................................................................................................43 4-2-2 Regional organizations and their roles ..................................................................................................47 4-3 Donor Support for Industrial Promotion........................................................................................................48 4-3-1 Multilateral organizations......................................................................................................................48 4-3-2 Bilateral organizations...........................................................................................................................51 4-4 Support Needs from the Viewpoint of Industry-related Policy......................................................................55 – i – Chapter 5: The Current Situation of Local Industry in the Target Area ........................................... 59 5-1 Current Economic Conditions, Characteristics, and Problems in Each Corridor Area ..................................59 5-1-1 The Maputo corridor area......................................................................................................................59 5-1-2 The Nacala corridor area .......................................................................................................................62 5-1-3 The Beira corridor area..........................................................................................................................66 5-2 Industry Promotion Policy, Budget, and Implementation in Each Corridor Area..........................................69 5-2-1 The Maputo corridor area......................................................................................................................69 5-2-2 The Nacala corridor area .......................................................................................................................71 5-2-3 The Beira corridor area..........................................................................................................................74 5-3 Donor Activities Related to Industrial Development in Each Corridor Area.................................................76 5-3-1 The Maputo corridor area......................................................................................................................76 5-3-2 The Nacala corridor area .......................................................................................................................79 5-3-3 The Beira corridor area..........................................................................................................................81 5-4 Michinoeki Pilot Project Development Study..................................................................................................83 5-5 Local Industries with Development Potential and Their Needs for Assistance .............................................86 5-5-1 The Maputo corridor area......................................................................................................................86 5-5-2 The Nacala corridor area .......................................................................................................................95 5-5-3 The Beira corridor area........................................................................................................................108 Chapter 6: Present Conditions and Challenges in the Private Sector ...............................................116 6-1 Present Conditions in Major Industries........................................................................................................116 6-1-1 Industry in general...............................................................................................................................116 6-1-2 Outline of industries ............................................................................................................................123