Format

Case Analysis of Mozambique

1. Time Context
2. View Point:
3. Central Problem
4. OBJECTIVES( 3 objective)
5. AREAS OF Consideration

SWOT

1. Alternative Course of Actions (12 ACAS) note each ACA should be familiar for example if is about econamic growth for (ACA 1 , 2 and 3 ,) aca 4 5 6 about political growth, etc..

ACA#1 with Advantages and DisAdvantages

ACA#2 with Advantages and DisAdvantages

ACA#3 with Advantages and DisAdvantages

ACA#4 with advantages and Disadvanatages

ACA#5 with advantages and Disadvanatages

ACA#6 with advantages and Disadvanatages

ACA#7 with advantages and disadvantages

ACA#8 with advantages and disadvantages

ACA#9 with advantages and disadvantages

ACA#10 with advantages and disadvantages

ACA#11 with advantages and disadvantages

ACA#12 with advantages and disadvantages

VII. Recommendation

Choose the best ACA and explain for example choose 1 for ACA 1, 2 3 , choose 1 for ACA 4, 5 6 , explain , choose 1 ACA for 7, 8 9 explain

VIII. Plan of Action:

example:

1.Board of Directors approves the recommendation of having an Employee Incentive Program.

2.CEOO prepares a Plan of Action to include the following:

1.Evaluation of employees to separate the skilled, effective, and efficient employees from unskilled, ineffective and inefficient employees.

2.Analyzing of different types of incentives that can be used in the company.

3.Checking of the financial resources.

4.Allocation of budget.

5.Submit the plan of action to the Board for approval.

6.Implement the plan.

Activities/Strategies:

Responsible Person:

Budget Allocation :

Time Frame:

The case of Mozambique

1. MOZAMBIQUE: the social, economic and policy context in a birds'-eye view Location and demography Mozambique is a subtropical country located on the southeast coast of Africa. It covers a total area of almost 800 000 Km2 and it shares boundaries with Malawi, South Africa, Swaziland, f Tanzania, Zambia and Zimbabwe. In 2000, the population was estimated around 17.2 million people1

Key factors in politics and economic history

which mean an average of 20 inhabitants per Km2 with the majority of the people living in rural areas. Low population density is therefore a common demographic feature of all the 10 provinces.

Mozambique won its independence in 1975 in parallel with the Portuguese revolution, causing the exodus of most Portuguese settlers and Asian trader. In addition, factors such as the outbreak of a civil war (from the late 1970s to 1990) in combination with the adoption of central planning and nationalization of major enterprises in Mozambique resulted in a collapse of the productive and public services, and the destruction of basic infrastructure.

From 1992, the peace process was rapidly followed by a new economic policy, which includes economic liberalization based on privatization of the economic assets and functions, market-based exchange rates and prices, plus a rationalization of public expenditures and fiscal balance. This was coupled with a process of decentralization that was gradually adopted through the creation of 33 districts and the election of their representatives. Mozambique today

In February/March 2000, Mozambique was hit by the country's worst flood in 50 years, leaving 10% of the total population temporarily homeless and facing the lost of crops, livestock, seeds and infrastructure. However, peace, better policies as well as rising foreign investment and substantial external assistance, have all together contributed to a strong economic performance during the last years, characterized by GDP growth of 10% since 1996, low inflation rates and rapidly growth of private investment and consumption.

Rural people in Mozambique are poor because they are isolated, largely cut off from, and have few contacts with, the formal economy. They lack communication systems, as well as social infrastructure such as clean water supplies, health facilities and schools. In addition, their ability to generate incomes is constrained by their lack of equipment and finance to purchase it. Thus, they work mainly with non-optimal or inefficient techniques. In fact the lack of access to markets means that they are unable to realize the full value of their production. As a consequence, there is a clear need for capacity building in the areas of knowledge, ability and organizational skills to manage their social and economic activities in an effective and dynamic manner.

2. POLICY FRAMEWORK

Recent changes in the political context of Mozambique have opened the possibility for new development strategies to be applied. The present political framework however, is still very much conditioned by the past tendencies. Mozambique went through different stages: from heavily state controlled development to structural adjustment and the new political framework. In this last context, the LED approach is seen as a key component of the poverty reduction strategy undertaken by the Government since the Constitutional reforms in 1990. From State-controlled development towards bottom-up development approaches.

Until shortly before 1990, the central Government's institutions promoted local economic development by direct supply of goods such as seeds and fertilizers; and training services through its decentralized Government agencies throughout the country.

This historical context was characterized by centralized decision-making processes that included measures of goods-price fixation and foreign currency rationalization with the resultant market distortions. At the same time, markets controlled by transnational corporations and the fact that National Development Investments were mainly oriented towards the provision of basic infrastructure and services, undermined the most important source of national self-employment represented by the urban small and medium enterprises (SMEs). All these measures resulted in unfair competition conditions for SMEs. In addition, SMEs were left without any institutional support.

Donor agencies and aid programs were mainly sector focused and were often not demand driven. Governmental decisions about large-scale industrial investments were also mandatory and taken without any local consultation. Regional development policies helped only as general guidelines for the spatial allocation of public investment but rarely encouraged the employment-intensive investment at the local level.

These economic conditions in Mozambique changed in 1990 with the approval of the country's new Constitution that resulted in fundamental changes in development policies. Market liberalization and structural adjustment determine the development agenda ending State-lead market regulation.Structural adjustment

New economic policies included structural adjustment measures such as: economic liberalization (deregulation of prices and foreign capital control); decreasing budget deficit (cuts in state subsidies); devaluation of national currencies (to support the export market and restrict imports) and privatization of inefficient state-owned enterprises.

In order to reinforce the national strategy for business facilitation the ILO -Director General Report (2003: p.48) advise on business environment: "A policy and legal environment that lowers the cost of establishing and operating a business, including simplified registration and licensing procedures, appropriate rules and regulations, and reasonable and fair taxation, will help new entrepreneurs to start in the formal economy and existing informal businesses to enter it."

, financial reforms allowed for the creation of the legal basis for micro-finance operations (that can now be granted to NGOs as well as to individuals); fiscal policy reforms concerning VAT

introduction (17% value added on all transactions) and taxes on business profit cut in addition to tax reduction for those investing in the poorest areas of the country. Poverty reduction strategy

In accordance to the widespread development approach that places the main responsibility for policy design and implementation in the hands of the developing countries' Governments, the Government of Mozambique (GOM) embarked in the formulation of a Poverty Reduction Strategy paper (PRSP).

The Government's Action Plan for the Reduction of Absolute Poverty (PARPA) 2001-05 aims to substantially reduce the levels of absolute poverty in the country from 70% of total population (1997) to 50% in 2010. Strong and broad-based growth with poverty reduction is then the main goal of Mozambican's economic policy. To attain this objective, the Government is committed to maintain financial discipline, improving the environment for the expansion of private sector activities, and fostering development of a strong export base through liberal trade and investment policies. Key elements of the Government strategy include: an increase in public savings through mobilization of revenue and rationalization of expenditures; improvement in the efficiency of public sector operations; further development of the financial system; and finally, a legislative reform aimed at increasing economic security and reducing the cost of conducting business.

Awareness of the need for integrated approaches made agricultural, agro-industrial and industrial policies to be considered within a broader setting of territorial economic development strategies given that their economic impacts are so closely related. The Mozambican economy is mainly rural; agriculture is a main source for employment and income generation.

Consequently, agriculture still remains the starting point for any development strategy. The promotion of agro-industry is an enabling factor for agriculture and rural development and the growth of employment. It is a key element given that it expands the market for agricultural products, contributing to the expansion of agricultural investment and employment, in addition agro-industries, in themselves, can create many rural and urban jobs.3

Linking national and locallevels

The poverty reduction strategy is based on six priorities that should ensure an inclusive development process: education and health basic infrastructure provision; agricultural and rural development; transport and communications infrastructure, including roads, railways and ports, coastal shipping services and postal services and telecommunications; enabling environment for enterprises through fiscal reforms and investment promotion policies; good governance; and macroeconomics and financial stability.

It is widely acknowledged that flexibility and liberalization of macro-economic policy do not necessary lead to a significant increase in employment and improved working, and living standards of the poor4 (as it has been widely highlighted by several authors5.). It is also emphasized that to achieve sustainable and inclusive development, mechanisms that translate macro/national policies into concrete actions at a local level, should be ensured6

One of the main difficulties in creating these mechanisms is in fact how to integrate regional development policies at different levels, i.e. national, provincial and district levels. Even if the hierarchical system of central planning has been abolished, sectoral approaches to development still persist and therefore policies related to area-based issues are taken by different ministries with the resulting problems of coordination and instances of decision-making that are not clearly defined.

Technical capacity of local Government staffs and politic-administrative institutions (for example, town or district) is therefore crucial to carry out the decentralization process. Another issue that should be taken into account is the local financial system in place, given that business creation and investment attraction capacity will strongly depend on it. Finally, the lack of non-financial business support services and of entrepreneurial culture could block the effective development of SMEs in the country.

SMEs and micro enterprises are an important font of employment creation in developing countries, but entrepreneurs require not only the basic transport and communication infrastructure but also assistance in accessing new markets, introducing modern technologies and new products, as well as the possibility of forming joint ventures and strategic partnerships with foreign industries. Moreover, they need intermediaries to assist them in accessing opportunities available in financial markets and new business regulatory frameworks.

Decentralization: Political Reform At a Local Level: Provincial and District

According to the PARPA document, at local level (mainly districts), the interaction with other actors of the society should be more institutionalized and particularly, involving poor population groups. According to this, the main objective of the Decentralization Process is to "impart greater dynamism and capacity to Provincial and District Governments for the essential interaction with other social actors in facing the challenges of combating poverty and promoting economic growth.

The new Constitution foresees a more important role for the provinces in promoting participatory decision-making processes and democratization of local institutions. The adoption of the Law and complementary legislation on Local Bodies of the State

See for example the increases in inequality produced by major development poles programs. More information on p.9. 5 See, Bardhan (2000) 6 As stated in the last ILO Report of the Director General: Working out of poverty, (2003: 44) "Sustainable impact on poverty depends on good policy design and local capacity building" 7 PARPA 2001-2005 (p:185.1) 8 District level of the National political administration. Ensuring among other aspects that administrative and financial decentralization and de-concentration take place, making participatory district planning possible was considered as a step forward into the democratization process of the country.

Previously to this law (National Law for Local Bodies Reform), the Governor of the Province was the one that designed the District Administrator without local community participation. The new Law provides the legal bases to start the electoral process at a District level. So far, the local community has democratically elected 33 district administrators. In accordance with the Government Development Plan of 1998, five year Provincial and District Development Plans have been formulated by the Provincial and District authorities, involving representatives of the civil society and private sector. These plans aim to define development strategies trough prioritizing community's local needs and seeking to coordinate these objectives with the national approach.

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