Mozambique: Government moves ahead with incentives to boost foreign investment in 2008

25 February 2008

Maputo, Mozambique, 25 Feb – The government of Mozambique is putting the finishing touches on the introduction of measures to simplify the foreign investment process and new incentives for investors, as part of reforms underway to make business more favorable in the country.

Following the recent launch of an ambitious packaged of reforms aimed at encouraging the activities of private economic agents, Aiuba Quereneia, the minister for planning and development, last week in an interview with Reuters said that measures to encourage foreign investment should make it possible in 2008 to see 50 percent growth in foreign direct investment (FDI), to US$12 billion.

“We hope to attract more investors this year than in 2007. We are going to offer attractive tax incentives and simplify the investment process, particularly for farming, tourism and mining,” the Mozambican minister said.

Last year, the government of Mozambique approved 192 foreign investment projects, to a total value of US$8 billion, which was a ten-fold rise on 2006.

The raw materials, industry, agriculture and agro-industry and tourism sectors were the main destinations for FDI.

By provinces, Tete and Nampula received the highest levels of investment, with US$5 billion and US$1.6 billion, respectively, with the former relating to coal mining and the latter to construction of a refinery.

Amongst the projects that attracted investment was oil exploration in the Rovuma basin, in the north of the country, where oil companies such as Canada’s Artumas and Malaysia’s Petronas are moving ahead with prospecting work.

Hydroelectric projects – particularly the new dam on the Zambeze river (Mphanda Nkua), the concession for which was granted to Brazil’s Odebrecht, and construction of the new Cahora Bassa power production plant, upstream – are expected to stimulate foreign investment, together with the larges number of tourist resorts being built.

According to Quereneia, growth in investment will be decisive for Mozambique to reach its economic growth targets for this year, of 7 percent of the gross domestic product (GDP), and to keep inflation at below 10 percent.

The Mozambican government has a number of reforms scheduled for this year aimed at simplifying the life of companies in the country, in order to become the most competitive market in Southern Africa by 2015.

In the Doing Business 2007 list, drawn up by the World Bank, Mozambique moved up six places in the ranking (to 134th out of 178 countries), as compared with the previous year.

The report particularly values reforms carried out over the last year in the areas of business start-ups, investor protection and contractual obligations, three of the ten factors that weigh on the final assessment.

Amongst the aspects considered, the best in Mozambique, according to the World Bank, remained payment of taxes (33rd) and cross-border trade (72nd); and the worst was its labor system (162nd).

The Memorandum of Economic and Financial Policies, agreed between Mozambique and the International Monetary Fund (IMF), for this year outlines the reform of inspections of economic activities and the simplification of the company licensing process.

A new bankruptcy law has also been outlined, along with a review of legal procedures fro importing and exporting as well as adjustments to the tax reimbursement system. (macauhub)