VZCZCXRO7361
RR RUEHDU RUEHJO RUEHMR
DE RUEHTO #0567/01 1370530
ZNR UUUUU ZZH
R 170530Z MAY 06
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 5387
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  0043
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 MAPUTO 000567 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR HTREGER AND JMALONEY 
JOHANNESBURG FSC FOR RDONOVAN 
JOHANNESBURG TDA FOR DSHUSTER 
USDOC FOR RTELCHIN 
MCC FOR SGAULL AND MHARRINGTON 
USAID FOR AA/AFR AND AFR/SA 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: Mozambique's Private Sector Raises its Voice - GRM 
is Attentive 
 
 
MAPUTO 00000567  001.2 OF 003 
 
 
Sensitive But Unclassified - Handle Accordingly 
 
¶1. (U) Summary: On May 3-5 Mozambique's national business 
association, CTA (Confederacao das Associacoes Economicas de 
Mocambique) held its ninth annual conference.  Entitled "For 
a Better Business Environment: Opportunities in the Global 
Market," the conference focused on the effects of 
globalization and spurring economic growth at the district 
level.  In a sometimes lively forum, two key contentious 
issues emerged: whether land could be used as collateral and 
whether the government ought to fund a development bank. 
The private sector and government representatives disagreed 
over the land question, but most favored a development bank. 
The gathering was not designed to be decisive, rather an 
opportunity to hear advocates for range of policies of 
central interest to the private sector and to underscore 
some the key challenges businesses face.  The GRM was 
attentive.  In this sense CTA's conference was a success. 
End summary. 
 
¶2. (U) On May 3-5 Mozambique's national business 
association, CTA (Confederacao das Associacoes Economicas de 
Mocambique) met in Maputo for its ninth annual conference. 
(Note: The USG has provided significant financial and 
technical support to both CTA and the conference for the 
past eight years.  End note.)  Entitled "For a Better 
Business Environment: Opportunities in the Global Market," 
the conference focused on the effects of globalization and 
spurring economic growth at the district level. Keynote 
speakers for the conference, Dr. Stephen Radelet and Dr. 
Frank Flatter, both respected market economists, were 
identified and funded through USAID. 
 
¶3. (U) President Guebuza, the Mayor of Maputo, the Minister 
of Industry and Commerce Antonio Fernando, and the President 
of CTA all addressed the conference during the opening 
session.  There was significant, high-level GRM involvement 
throughout the three days of the conference, including two 
speeches by the Prime Minister, speeches by the Ministers 
for Industry and Commerce, Agriculture, Labor, Justice, 
Tourism, Transportation and Communication, and Public Works 
and speeches by the Vice-Ministers for Finance and for 
Planning and Development.  In addition to the many 
presentations given by the various CTA sector interest 
groups, there were presentations by senior business leaders 
such as the Chairman of the Board of BCI Fomento Bank and 
the head of Dunavant Mozambique, by the USAID/Mozambique 
Mission Director, by the founder of a local business school, 
and by a District Administrator.  A session exploring the 
role of women in business showcased a panel including the 
First Lady, Mrs. Maria da Luz Guebuza.  A closing summary of 
the main issues raised by the conference was provided by the 
Executive Director of CTA. 
 
 
GRM Sees Land Tenure Regime No Impediment to Development 
--------------------------------------------- ----------- 
 
¶4. (SBU) The President's and other high-level speeches all 
favored support for private sector development and an 
improved business environment.  However in one critical 
area, land use rights, there was considerable discord 
between the private sector and the GRM.  The private sector 
favors the simplification of the cumbersome land use 
transfer processes and legal requirements, and the 
strengthening of the security of land use rights/tenure. 
The GRM, on the contrary, asserts that the existing system 
is perfectly sufficient and does not negatively affect 
private sector growth or investment.  In his speech, 
President Guebuza, indicated that he did not know of a 
single instance where private sector investment was hindered 
by current land policies, citing - somewhat inappropriately, 
in our view - the success of mega-projects such as the giant 
aluminum mill, MOZAL.  (Note:  Under the Mozambican 
constitution all land is owned by the Government. 
Individuals are given long-term leases for specific uses and 
applications for lease rights are approved on a case-by-case 
basis. The sale of lease rights is subject to administrative 
approval by government.  End note.) 
 
MAPUTO 00000567  002.2 OF 003 
 
 
 
¶5. (SBU) Comment: Land increasingly has become a contentious 
topic, as the private sector and some donors press that land 
use rights be made sufficiently transparent so that land can 
be used as collateral.  The GRM, on the other hand, is 
cautious about taking this step, which some believe will 
lead to privatizing land - something that for political 
reasons many, including members of civil society, in this 
former socialist country oppose.  Their oft stated concern 
is that were land to be privatized, many poor farmers would 
be bought out and forced to migrate to the cities, where 
they would have considerable difficulty finding work.  Some 
observers, however, cynically claim that many of the 
powerful in Mozambique already have obtained large 
concessions, and prefer the rather murky status quo, which 
favors the well-connected.  End comment. 
 
Development Bank 
---------------- 
 
¶6. (U) Another contentious issue repeatedly raised by both 
GRM officials and private sector participants was the need 
for a Mozambican development bank.  (Note: For most in 
attendance, such a bank would be a agricultural development 
bank, although some advocated credit for industry, too.  End 
note.)  Nearly all of the GRM officials favored establishing 
one.  Of the GRM officials who spoke at the conference, only 
the Vice Minister of Finance discussed the need for 
proceeding carefully and cautioned that without the 
necessary groundwork - proper land registries, clear titles, 
bankruptcies provisions, etc - such a bank would be unable 
to properly function.  The two keynote speakers had also 
promoted the idea of proceeding cautiously as development 
banks in most cases have not been successful.  Furthermore, 
Dr. Radelet presented the economic argument against 
development banks, stating that any concessional lending 
provided by the bank would have to be paid for by hiking 
interest rates elsewhere, if the government did not want to 
increase the rate of inflation.  The majority of the private 
sector, with the notable exception of the Chairman of the 
Board of BCI Fomento Bank, was extremely supportive of the 
concept of a development bank as many persons were able to 
obtain "free money" under previous development bank schemes. 
 
¶7. (U) The audience reserved most of its applause for 
requests for special favors or subsidies (the development 
bank was only the largest of several angles) from the 
government.  Fisheries asked for fuel subsidies, remoter 
regions asked to pay the same price for imported fuel as the 
port cities, etc..  One intervention recommended that Dr. 
Stephen Radelet, the keynote speaker, who had dared suggest 
that development banks always cost money and almost never 
work, should be strangled.  The Prime Minister, in her 
closing, defended the development bank, but also said that 
in Mozambique, it is considered impolite to strangle honored 
guests. 
 
¶8. (U) Members of the private sector expressed general 
satisfaction with the conference, although a recurring 
complaint was lack of time for debates.  Previous 
conferences allowed more time for debates and discussions 
with the various Ministers, by holding simultaneous sessions 
and making fewer formal presentations. 
 
Comment 
------- 
 
¶9. (U) Despite a good deal of support from the floor for 
policies that would cause more harm than good, the 
conclusion was a sober focus on four major issues:  fiscal 
policy; financial services; red tape; and transaction costs. 
CTA showed itself to be capable of responsible policy 
analysis and President Guebuza clearly welcomes this. 
Improving the business environment was the focus of this 
conference, and President Guebuza and other GRM officials 
are clearly supportive of this endeavor.  There are also 
indications that he, unlike his predecessor, is willing to 
make the bureaucracy yield to some reasonable reforms. 
 
 
MAPUTO 00000567  003.2 OF 003 
 
 
¶10. (U) It is significant that the private sector is able to 
raise its voice and air complaints to government officials, 
and even more significant that government officials take 
time to listen and respond publicly.  While the exchange may 
not always be exactly what we want to hear, the exchange 
itself is critical to the continuing advancement of 
Mozambique's democracy and economy. 
 
La Lime