US embassy cable - 04MAPUTO1053

UNCLAS SECTION 01 OF 03 MAPUTO 001053 
 
SIPDIS 
STATE FOR EB/IFA/OIA - ABRYAN, AF/S - KEES DAVISON 
PLEASE PASS USTR 
COMMERCE FOR AMANDA HILIGAS 
LABOR FOR ILAB - PATRICK WHITE, BOB YOUNG 
JOHANNESBURG FOR REGIONAL LABOR OFFICER 
E.O. 12958: N/A 
TAGS: EINV, EFIN, ELAB, KTDB, PGOV, MZ, OPIC 
SUBJECT: INVESTMENT CLIMATE STATEMENT APPENDIX FOR 
MOZAMBIQUE - 2004 
 
REF: STATE 141379 
 
1. Per reftel, post submits Investment Climate Statement 
(ICS) appendix below: 
MOZAMBIQUE: July 2004 Appendix to 2003 Investment 
Climate Statement 
This appendix serves as an update to the 2003 Investment 
Climate Statement for Mozambique. It has been provided 
to assist investors in the interim period resulting from 
the U.S. Government's decision to begin publishing the 
Country Commercial Guide (of which the Investment Climate 
Statement is a chapter) on a calendar year basis, in 
January instead of August. 
The United States Government has reviewed the 2003 
Investment Climate Statement for Mozambique, and has noted 
the following changes that have occurred since its 
publication. In most circumstances, if a portion of the 
2003 Investment Climate Statement has not been modified in 
this appendix, it is because the U.S. Government is 
satisfied that it continues to accurately reflect the 
state of affairs in Mozambique as of July 2004. 
Openness to Foreign Investment: 
-------------------------------- 
Several indicators were published in 2004 that shed light on 
Mozambique's process of business registration. The "Doing 
Business in 2004" Report, by the World Bank, identified 
Mozambique as one of the most difficult countries for 
business establishment, citing an average of 14 steps and 153 
days to register a business. 
Privatization has slowed down and impediments remain in the 
privatization of parastatals, largely because these deals are 
politically sensitive. The GRM has indicated that it is 
searching for private investors in the case of Linheas Aereas 
de Mocambique (LAM), Mozambique Telecommunications (TDM), and 
Mozambique Electricity (EDM). To date, this has been a spoken 
initiative with no real action to solicit the interest of 
private firms and move forward. 
Conversion and Transfer Policies: 
--------------------------------- 
No significant changes since 2003. 
? 
Expropriation and Compensation: 
------------------------------- 
No significant changes since 2003. 
? 
Disputes Settlement: 
-------------------- 
The current commercial code, from 1888, is under revision. 
The National Assembly did not pass newly proposed legislation 
and the Code rests with the Government for refinement. It is 
anticipated the National Assembly will vote on the Code again 
in the Extraordinary Session in October 2004. 
Two centers for commercial arbitration, one in Maputo (CACM) 
and a second in Nampula, have opened and are operating 
successfully. These facilities offer arbitration for 
complaints between companies, and do not deal directly with 
labor issues. 
? 
Performance Requirements and Incentives: 
---------------------------------------- 
The GRM identifies "Rapid Development Zones" and grants 
special fiscal, labor, and immigration arrangements for 
companies operating in these zones. Zones, as identified by 
the Investment Promotion Center (CPI) in 2004, include: 
Niassa Province, Nacala District, Ilha de Mocambique 
(Mozambique Island), Ibo Island, and the Zambezi River Valley 
(encompassing parts of Tete, Sofala, and Manica Provinces). 
Investments in these zones are exempt from import duties on 
certain goods, exemption from the real property transfer tax, 
and an investment tax credit equal to 20% of the total 
investment (with a right to carry forward for five years). 
The GRM continues to support development of "industrial free 
zones" (export processing zones). Please see "Foreign Trade 
Zones/Free Ports" heading below. 
? 
Right to Private Ownership and Establishment: 
--------------------------------------------- 
No significant changes since 2003. 
? 
Protection of Property Rights: 
------------------------------ 
Intellectual property right infringement continues to be a 
relatively insignificant problem in Mozambique due to the 
small size of the domestic market. There is, however, an 
increasing number of pirated copies of audio, videotapes, and 
DVDs and other goods (sunglasses, etc) sold in the informal 
market. 
Transparency of the Regulatory System: 
-------------------------------------- 
No significant changes since 2003. 
? 
Efficient Capital Markets and Portfolio Investment: 
--------------------------------------------- -------- 
No significant changes since 2003. 
? 
Political Violence: 
------------------- 
Opposition party members, both from RENAMO and small 
independent parties, complained of intimidation prior to and 
during the 2003 municipal elections, but there were no 
reported cases of political violence. In speaking with 
political party leaders prior to the 2004 presidential 
elections, no political violence is expected. Many opposition 
parties and FRELIMO recently subscribed to an electoral code 
of conduct to be observed during the 2004 electoral process. 
Although not legally binding, the code commits the signing 
parties to avoiding acts of violence during the period. 
? 
Corruption: 
----------- 
The GRM launched a new Anti-Corruption Unit in the Office of 
the Attorney General that is charged with investigating and 
prosecuting corruption-related offenses. The National 
Assembly passed a new anti-corruption law in 2004 that 
updates previously antiquated legislation. Civil society has 
become more vocal on corrpution-related issues and is 
demanding stronger government action. The anti-corruption 
NGO, Etica Mocambique, was formed to work on ameloriating 
this problem. Recently, Etica has started a television and 
print media sensitization program to help citizens identify 
and protect themselves against cases of corruption. 
? 
Bilateral Investment Agreements: 
--------------------------------- 
The Bilateral Investment Treaty (BIT) between Mozambique and 
the United States is still awaiting Mozambican ratification 
in the National Assembly. The UK completed their BIT with 
Mozambique in March 2004. 
OPIC and Other Investment Insurance Programs: 
--------------------------------------------- 
No significant changes since 2003. 
? 
Labor: 
------ 
The estimated work force in Mozambique numbers 9.2 million. 
In 2004, the GRM increased the country's statutory minimum 
wage by slightly more than the 2003 inflation rate of 13%. 
The minimum wage for industry, services, and the civil 
service rose by 14%, from $41 to $47 per month. The minimum 
wage for agricultural workers rose by 15%, from $29 to $34 
per month. Although the hike for agricultural workers was 
higher, there is still a significant gap between wages for 
different groups. Nationwide literacy levels are estimated at 
48% with municipal areas accounting for the majority of 
literate adults. 
Labor unions, created during the socialist years, are gaining 
strength and asserting greater independence from the ruling 
party, FRELIMO. Total membership among Mozambique's fourteen 
unions is close to 200,000. With respect to revision of the 
labor law in 2004-05, labor unions are exerting significant 
pressure on the GRM to keep many of the law's extremely 
pro-worker provisions. 
? 
Foreign Trade Zones/Free Ports: 
-------------------------------- 
The two essential requirements for Industrial Free Zone 
status are: job creation for Mozambican nationals and the 
exportation of at least 85% of annual production. Industrial 
Free Zone Developers enjoy an exemption from customs duties, 
VAT, and Specific Consumption Tax on the importation of 
construction materials, machinery, equipment, accessories, 
accompanying spare parts, and other goods destined for the 
establishment of the Industrial Free Zone. Mozambique's big 
commercial success stories, such as MOZAL and SASOL, operate 
in industrial free zones. 
LA LIME